Millionaire Crackdown May Be Elusive

Posted January 14, 2003 at 6:36pm

While the federal courts weigh the constitutionality of the controversial new campaign finance law, a number of campaign finance experts have already rendered their own verdict on one particularly complicated section of the regulations.

The so-called millionaires’ amendment, a complex provision intended to level the playing field for candidates who are facing wealthy self-financed opponents, is nothing short of an accounting nightmare, according to political scientists, party operatives and federal officials grappling with it.

Ellen Weintraub, the newest member of the Federal Election Commission and current chairwoman of the campaign watchdog group, said in an interview that she is unsure of “whether people will actually take advantage of it, given how complex it is.”

The provision raises individual contribution limits for House and Senate candidates depending on the amount of personal funds their opponents use in connection with their campaigns. It also removes limitations on national and state party committee contributions to a candidate if his or her opponent is spending in excess of a threshold amount.

If that sounds simple, the process by which the provision is triggered is far from it.

The section of the law is riddled with seemingly complex mathematical equations dependent on several variables ranging from the amount of personal funds each candidate is contributing to their campaign to — in the case of Senate candidates — a complicated formula determined by the voting-age population of their states.

Moreover, some analysts say the new millionaires’ regulation will do little to actually reduce the electoral advantage held by wealthy candidates who dump millions of dollars of their own money into their campaigns each election cycle.

To get an idea of just how complex this regulation is the FEC issued a 142-page “interim” final rule in late December to implement the new provision, along with a 35-page document attempting to explain in layman’s terms what they’d done.

“People may decide it’s not worth it,” Weintraub said.

Michael Malbin, director of the D.C.-based Campaign Finance Institute, also noted that the millionaires’ amendment sets up a specific process by which various threshold levels of funding must be reached before the affected candidate can react and the FEC exempts them from the statutory contribution limits to help them build up their war chests.

But time is money, and any impediments to that process could doom a campaign that is trying to play catch-up with “Joe Millionaire.”

“It’s a complex process,” Malbin said, theorizing that “a candidate who plans to self-finance and be diabolical about it, presumably, could withhold most of his self-financing until it’s too late for the commission to react.”

Currently, the FEC is accepting comments from the public on the new rules, and it may hold a public hearing on the topic if one is warranted. The agency has also said it is open to modifying the rules after the 60-day comment period if it finds that changes are necessary.

The millionaires’ provision was crafted by Sens. Pete Domenici (R-N.M.), Mike DeWine (R-Ohio) and Dick Durbin (D-Ill.). Companion language was sponsored in the House by Rep. Shelley Moore Capito (R-W.Va.), who defeated a wealthy self-financed candidate, Jim Humphreys (D), two elections in a row.

Billed as a way to level the playing field for candidates and encourage healthy competition, the provision gained momentum among incumbent lawmakers following the 2000 campaign cycle, after incumbents such as then-Sen. Slade Gorton (R-Wash.) were ousted by wealthy challengers — in Gorton’s case, Sen. Maria Cantwell (D-Wash.).

Other candidates adding fuel to the fire were Sen. Jon Corzine (D-N.J.), who dumped more than $60 million of his own money into his race in 2000 and sometimes jokes that the provision is better known as the “Corzine amendment.”

The lawmakers who crafted the provision in 2001 publicly claimed that it was a necessary fix to level an uneven campaign playing field.

DeWine argued to The Associated Press that it would correct a “ludicrous situation.”

“Everybody is limited to $1,000 [contributions] except one person, the candidate. To most people this would seem to be an absurd situation,” DeWine said.

Sen. John McCain (R-Ariz.) also defended the provision, at the time arguing to reporters that the millionaires’ amendment would send an important “message … that if you are a multimillionaire and you want to spend $60 million, at least the person you’re running against has an opportunity to raise more money to be more competitive.”

Ray La Raja, an assistant professor of political science at the University of Massachusetts at Amherst, said he believes the Bipartisan Campaign Reform Act will do little to discourage rich candidates from running for office. As the parties and their candidates begin adapting to the brave new world of campaign finance, he is already predicting an “intensified search for candidates willing to finance their own campaigns.”

Research by Jennifer Steen, an assistant professor of political science at Boston College, demonstrates that the millionaires’ amendment would have had a very limited impact on the election outcomes if it had been in effect for the candidates who actually ran in 2000.

Steen’s research, soon to be published as a chapter in the upcoming book “Life After Reform: When Bipartisan Campaign Reform Act Meets Politics,” showed that the increased contribution limits would often have aided candidates who didn’t need them in the first place.

At the same time, her research showed that the increased contribution limits would likely have gone unexploited by candidates who could have used additional funds but faced a more practical consideration — they simply didn’t have a strong base of “maxed-out” contributors to hit up for more money.

According to Malbin, who is editing the upcoming book, Steen’s research showed “that in the vast majority of cases where it could kick into effect are races that are overwhelmingly ones where this amendment would not be enough to make a difference.”

The races of 2000 where the millionaires’ amendment could have had an impact, according to Steen’s research, were in those races which were close enough and in which the non-self-financed candidate had a large enough base of donors to extrapolate additional contributions.

They included the races between: now-Sen. Mark Dayton (D-Minn.) and former Sen. Rod Grams (R-Minn.); Corzine and former Rep. Bob Franks (R-N.J.); and Cantwell’s successful challenge to Gorton. Only the outcomes of three House races might have potentially been affected, Steen’s research showed.

Another aspect of the amendment is that it supposedly discourages wealthy candidates from making loans to themselves by prohibiting candidates from, after Election Day, repaying outstanding loans they made to their own campaigns that exceed $250,000.

Steen argues that repayment limitation might have deterred about one-third of the candidates who actually ran in 2000 from self-lending, but even so, she argues that the election outcomes would “not likely have been affected much.”

The fact that so few self-financed candidates attempt to pay themselves back anyway indicates that banning loan repayment might be inconvenient, but is not exactly an effective deterrent from using one’s wealth in a campaign. Of the 29 candidates who made personal loans to their campaigns exceeding $250,000, 15 did not seek repayment, while 14 did.

Malbin says incumbents will more likely reap the benefits, noting that Steen’s research proved that of the general election candidates who would have potentially benefited from the millionaires’ amendment, 10 were incumbents, eight were open-seat candidates and only one was a challenger.

“It doesn’t make a difference in a large number of districts, but it could make a huge difference in a few races,” Malbin cautioned, explaining that the new regulation will most likely be utilized to help highly endangered incumbents who are engaged in a close election in a closely contested chamber.

That’s the very instance, he expects, when the party committees will appear and make unlimited contributions to help save that incumbent.

“I don’t think it will affect the [extremely wealthy] self-financed candidate at all,” Malbin said. “The one who’ll be deterred is the person who’s not rich, who’s putting a second mortgage on his house.”