What was soft money?

Soft money began in the 1980 election cycle as a way to get private money into the presidential public funding program. Ronald Reagan accepted public funds for his campaign, which means he also agreed not to raise private funds. He and the Republican Party were ideologically opposed to the program, though, and soon found a way to circumvent it. More accurately, they realized the FEC and Congress had recently provided the means for circumventing it.

That Congress would make adjustments to the FECA after the 1976 election was a given. The 1974 FECA was the most comprehensive campaign finance law ever enacted, and no one could know exactly how it worked in practice until after the first election. And no one could know for sure how the new federal law would mesh with fifty different state laws, few of which regulated the size and sources of contributions as strictly as the FECA.

Both parties in Congress agreed that the FECA had unintentionally restricted party-building activities in the 1976 election by treating grass-roots activities such as registering voters, getting voters to the polls, and distributing bumper stickers, yard signs, and sample ballots as in-kind contributions to federal candidates. Treating them as contributions, which the FECA restricted, put a damper on what had always been a standard part of election campaigns. The 1979 FECA amendments allowed parties to raise and spend unlimited sums of money for such party-building activities—as long as it was hard, FECA-regulated money.1

The FEC, however, had already created an opening for non-FECA money in federal elections. Elections for federal office in most states coincide with elections to state and local offices, and most state laws were more permissive than the FECA. The laws covering contributions were clear: state law regulated gifts to state candidates and the FECA regulated gifts to federal candidates. What was not clear was how much of which kind of money they could use to pay for the generic grass-roots activities that affected both state and federal candidates.

The FEC said they could use both state-r egulated and FECA- regulated money. In response to a 1978 request from the Kansas Republican Party, the FEC ruled that parties could use state-regulated money in proportion to the number of state and federal races in an election. As there were almost always more state and local than federal candidates, this ruling meant that state-regulated money could be used to finance most generic grass-roots activities. The FEC went further in 1979, ruling that the national parties could raise state- regulated money as long as they used it to assist state parties.

Congress acted to remove barriers to grass-roots participation in the 1980 elections while keeping the FECA in place. By themselves the 1979 amendments would have attained that goal. But the new FEC rules weakened FECA rules, which made 1980 the first federal election that was financed in part by nonfederal, or soft, money. How big a part is not clear, as the FEC did not require the parties to disclose the sources of their soft money until 1992.

Many state laws permitted corporations and unions to make contributions, so money from these sources, banned under the FECA, nonetheless found their way into federal elections. Again, there is no way to know how much of such money the parties raised before 1992. From 1992 through 2000, FEC figures show that the majority of soft money came from corporations and their executives; only a small minority came from labor unions.2

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