Did 527s just replace party soft money?

Not entirely. Section 527 groups were the best alternative to party soft money after BCRA, and the $440 million they spent in 2004 was almost 90 percent of the $500 million in soft money spent in 2000. But while 527s raised impressive sums of money, it was not the same kind of money as the parties could raise before BCRA.19

Section 527 groups were formed by non-party groups, not by parties. To be sure, many of the bigger groups were formed and managed by former party and government officers, who worked with interest groups that were very close to the parties. But giving to 527s was not the same thing as giving directly to parties, so those who did give had different motives from party soft-money donors. "It's not access money," Grover Norquist said of 527s, "it's movement money. They are not writing checks to sit down with congressmen."20

Another difference from party soft money is that 527s were not more or less equally divided between the two parties—the great majority of 527s were pro-Democratic groups. Only fifteen of the fifty biggest 527s were Republican, and the two biggest Democratic groups, America Coming Together and the Media Fund, spent more than all fifteen of the Republican groups combined. Soft money had become more important to the Democrats over the past two decades, and 527s were a way to keep the new kind of outside money flowing.21

The mix of funding sources changed, too. Corporations and trade associations contributed much less to the new 527s in 2004 than they had to party soft-money committees in 2000, while labor gave almost three times as much. Individual contributions also tended to be much larger, especially from Democratic donors: investor George Soros, Progressive Corporation CEO Peter Lewis, and Shangri-La Entertainment CEO Stephen Bing together gave more than $60 million; Soros and Lewis each gave more than the four biggest Republican donors combined.22

Reformers said the new 527s were so active in federal elections that they should have registered with the FEC as political committees and been subject to FECA limitations on fundraising. The FEC eventually agreed, at least in retrospect and regarding only a few groups. In 2006 and 2007, long after it would have had any deterrent effect, the agency levied heavy fines on the biggest 527s, including the Democratic groups Americans Coming Together and MoveOn. org Voter Fund, and the Republican groups Club for Growth and Swiftboat Veterans for Truth.23

Spending by 527s continued at a lower level in the 2006 midterms but dropped sharply in the 2008 presidential election. The biggest Democratic 527s in 2004 were mere shadows of themselves in 2008, if they still existed at all. The FEC's ruling that the most active 527s were PACs under the FECA was partly responsible for the drop, as it had led some 527s to disband. The presidential candidates also played a role: Barack Obama discouraged 527s and John McCain had led the opposition to them since 2000. For all the publicity they got at the time, 527s were just a blip compared to the twenty-two- year run of party soft money.24

But the decline of 527s did not mean a decline in outside money, which flowed almost as freely in 2008 as in 2004. FEC penalties might have had some effect here, too, by causing some of the groups that had formed 527s to switch to other kinds of tax-exempt groups, such as 501(c)s, which were the conduits of choice for outside money in 2008.25

 
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