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Business Week: September 20, 1999
Department: Washington Outlook

Campaign-Finance Reform: This Time, the Finish Line?
By Amy Borrus; Edited by Paula Dwyer

For years, Washington has been locked in a familiar cycle. Campaign spending soars. Inevitably, some finagling pol triggers a scandal. Reformers feel the public will finally demand changes in loophole-ridden campaign-finance rules. Yet the drive fizzles, doomed by apathy and incumbent politicians' fierce desire to protect the status quo.

Will 1999 see a rerun? So far, the script looks familiar. But the stock ending may be in doubt. As Congress returns from recess, reform prospects are improving. Presidential candidates are drawing attention to abuses in ``cleaner than Clinton'' manifestos. Record fund-raising keeps the spotlight on checkbook politics. And some executives, weary of nonstop shakedowns, are joining the reform drive. ``There's a feeling that politicians can be embarrassed'' into tightening the rules this year, says New York real estate developer Daniel Rose.

NEW LOOPHOLE? Rose and scores of other business leaders plan to blitz Congress with letters and phone calls when it revisits reform proposals this fall. First up is a House measure, co-sponsored by Representatives Christopher Shays (R-Conn.) and Martin T. Meehan (D-Mass.). The bill, which passed last year on a 252 to 179 vote, would ban ``soft money'' donations. These unlimited gifts, ostensibly meant to strengthen political parties, in reality are used to back individual candidates. The proposal also sets strict limits on ``issue ads'' by interest groups--thinly veiled candidate plugs in the guise of voter education.

The bill is expected to pass handily despite procedural hurdles thrown up by GOP leaders. Among the threats: a ``poison pill'' amendment by Majority Whip Tom DeLay (R-Tex.) that would let parties accept soft-money checks for Internet campaigning, such as Web site banner ads. The result: a potentially huge new loophole.

The real action will be in the Senate. Last year, a filibuster killed a companion bill by John McCain (R-Ariz.) and Russell D. Feingold (D-Wis.). This year, timing may help. ``Having the Senate vote on the heels of the House will increase the pressure,'' says Donald J. Simon, executive vice-president at reform group Common Cause.

Getting the 60 votes needed to snuff out soft money will be tough. But GOP leaders are feeling the heat. Some 100 execs--among them, Sara Lee Corp. CEO John H. Bryan and Frank C. Carlucci, chairman of Carlyle Group investment bank--backed a call by the progressive Committee for Economic Development for a soft-money ban. Senator Mitch McConnell (R-Ky.), who heads the Senate GOP campaign committee, lashed out with angry letters to CED trustees, urging them to resign.

The tactic may backfire. Since McConnell's late-July blast, the CED picked up 30 more executive endorsements, reports its president, Charles E.M. Kolb. ``The business community,'' says Feingold, ``may put us over the top.''

Even so, Senate prospects are iffy. To woo more Republicans, McCain and Feingold may opt for a simple soft-money ban coupled with a higher ceiling on individual gifts to candidates--so-called hard money--now set at $1,000. They also may give up on curbing issue ads. But that's a nonstarter for Democrats, who trail the GOP in hard money and fear Republican-aligned groups will flood the airwaves with issue ads.

Reformers plan to deploy phone banks, mailings, and door-to-door lobbying. They'll get help from such ardent pro-reform execs as venture capitalist Jerome Kohlberg Jr., who vows to buttonhole lawmakers. If the odd alliance of Naderites and Country Clubbers jells, Congress may be unable to resist the clamor for change. It won't be the sweeping overhaul reformers once envisioned. But it will be something.