The New Soft Money Campaign-finance reform didn't kill big political donations, it just changed the rules of the game. Meet the players.
By Jeffrey H. Birnbaum

(FORTUNE Magazine) – The fourth floor of the building directly across the street from the AFL-CIO headquarters in Washington looks abandoned. No receptionist greets visitors. The hallway lights aren't turned on. Most of the offices are empty except for cardboard boxes left by tenants past. And in the floor's waiting room, the only indications that work is being done at all are paper signs taped to the walls.

It doesn't look like much, but it is the heart of the big-money movement to unseat George W. Bush next year. Here, in space provided by organized labor, four separate organizations--with innocuous-sounding names like Voices for Working Families and America Coming Together--have begun to collect large checks and to plot multistate strategies to remove the President from office. These groups are, in effect, taking over the function of the Democratic National Committee, now barred by law, that once took in the much-vilified and unrestrained contributions called soft money. "These groups are crucial" to the anti-Bush effort, says Governor Bill Richardson (D-New Mexico), who has a group of his own called Moving America Forward. "Now that campaign finance reform is law," he says, "organizations like these have become the replacement for the national Democratic Party."

McCain-Feingold, as the campaign-finance law is commonly known, was supposed to eliminate massive contributions from national politics. After years of struggle, reformers finally were able to persuade Congress and the President last year to close a loophole that allowed individuals, corporations, and labor unions to pour as much soft money as they liked into the national parties. The specter of the tobacco or pharmaceutical industries "buying off" the Republican Party with million-dollar donations, or the AFL-CIO doing the same with the Democrats, was supposed to be a thing of the past.

But campaign cash is like the Pillsbury doughboy, says Republican lobbyist Ron Kaufman: "You push it in one place, and it pops out in another." McCain-Feingold blocked soft money from going into the national party committees, but it didn't stop funds from being sent outside that system. The Constitution's right of free speech prevented reformers from imposing any sort of blanket restrictions. So party loyalists have been working overtime to develop ways of keeping the soft-money spigot open without also violating the complex new law. For Democrats, soft-money entrepreneurship is flourishing in this one building in downtown D.C., the petri dish of the new money politics.

Its existence proves that big money and federal elections are inextricably linked. McCain-Feingold has spawned a new set of players to spread the lucre around. Most of these freshly minted kingmakers are Democrats, but not all of them. And additional groups are sprouting up all the time. There are so many, in fact, that the principals of these new organizations have to keep cheat sheets on their desks to follow all the changes. A pending decision by the Supreme Court about the constitutionality of McCain-Feingold could jostle the scene even more.

Everyone agrees that Democrats shot themselves in a vital spot when they championed McCain-Feingold. Many people believed that the Republican Party, with its far wealthier base of supporters, would be hardest hit by the law. But in fact, the GOP has spent years building a massive--and extremely responsive--small-donor list and doesn't need to rely on five-, six-, or seven-figure donations to make a go of it. Therefore, Democrats have no choice but to find new ways to funnel outsized contributions into the electoral process to remain even remotely competitive in Election 2004.

Enter Steve Rosenthal, Ellen Malcolm, Gerald McEntee, and Harold Ickes. None of these is a household name. But for Bush enemies they are the elite of the post-campaign-finance-reform world. They have all formed entities that can legally accept as much money as anyone cares to give and dispense the funds for political purposes--as long as their groups don't blatantly back any particular candidate. Their lawyers won't allow them to say so, but they are all determined, in effect, to elect Democrats in general, and the Democratic nominee for President in particular, next year. Think of them as directors of a privatized Democratic Party.

In some ways this setup is an improvement on the old party-centered system. In the last presidential campaign in 2000, the Democratic Party collected $245.2 million in soft money and spent it as it chose. Afterward, many prominent Democrats criticized its priorities, and for good reason: Al Gore lost his bid for the presidency, and Republicans won a majority of the nation's governorships as well as control of the U.S. Congress. The new, privatized structure allows donors to decide with much more precision where their money will go. Each organization has given itself a narrowly defined mission and is seeking funds for just that purpose and no other. For instance, Governor Richardson's group, Moving America Forward, will work to register Hispanic voters and get them to the polls in four states and also recruit more Hispanics to run for elective office.

In addition, the leaders of the largest new groups have created a coordinating council led by Cecile Richards, a former congressional aide who also happens to be the daughter of a Democratic icon, former Texas governor Ann Richards. The group, called America Votes, will try to encourage the new organizations as well as such traditional Democratic leaners as the Sierra Club, Planned Parenthood, and the Association of Trial Lawyers of America to complement one another's efforts rather than compete. After a recent meeting in Florida attended by about 20 of these like-minded groups, one of the representatives there approached Richards to say, "I guess this means we don't all have to go to Tampa."

But cooperation doesn't come naturally to Democrats, and it didn't come at all when these shadow parties were first established. One of the earliest groups, Partnership for America's Families, was formed by Rosenthal, a former political director of the AFL-CIO, and McEntee, president of the American Federation of State, County, and Municipal Employees. But the two headstrong laborites soon had a falling-out over who would be in charge. So McEntee started his own group, Voices for Working Families, and Rosenthal opened America Coming Together (ACT) along with one of the Democrats' top fundraisers, Ellen Malcolm, founder of Emily's List, the nation's largest political action committee. Both organizations have the same goal--mobilizing voters in swing states. The only major difference: ACT gets more of its money from non-union sources, including a $10 million gift from investor George Soros.

Malcolm is also raising funds with Ickes, a longtime friend and aide to former President Clinton, for an organization called, simply, the Media Fund. With about $5 million in pledges so far, the group will buy TV and radio commercials to promote the policies of whoever gets the Democratic nod for President. Ickes expects that Bush forces will barrage the Democratic nominee with ads as soon as he emerges next spring from the Democratic primaries. The Media Fund intends to fight back. "They're really going to pummel us and define the issues," Ickes says. "We need to be able to deal with that." He says his fund has already enlisted "some big names" as financial supporters, though he won't say who.

All of these programs are being undertaken despite a lot of disagreement about what the law truly means. One group, Grassroots Democrats, was put together in large part just to explain to state parties and to prospective donors what they can and can't do. "The law is so confusing that we believe there's a great need for technical assistance," says the group's executive director, Amy Chapman. Her organization will serve as a kind of seal of approval for contributors who want to know which states are conforming most effectively to the new law's many restrictions--at least as far as anyone can tell.

Republicans aren't yet confident that they know what those restrictions are and have shied away from forming their own privatized enterprises. Last year a group led by a former aide to House Majority Leader Tom DeLay actually returned a $1 million gift from the House Republican's campaign committee. The group, called the Leadership Forum, apparently feared that working too closely with a party-connected committee might be deemed improper down the road. GOP insiders say that their richest benefactors will remain on the sidelines until the legality of such organizations is tested.

Such a test will probably come soon. Republican lobbyists have discussed asking the Federal Election Commission exactly what the law allows, perhaps using as a guinea pig a conservative group like Progress for America, which has lately stirred up grassroots backing for Bush's judicial nominees. In the meantime, even the President's most active advocates, like the National Rifle Association, are staying away from privatized parties. "The law is very threatening in terms of the possibility of prosecution," says Wayne LaPierre, the NRA's chief executive. "People are going to end up in jail under this law, and I'm going to make sure the NRA is squeaky-clean."

Some huge Republican checks are still being delivered, of course. The Republican Governors Association, which has separated itself from the Republican National Committee, is said to be a repository for many of them. Several industry associations that tilt toward the GOP also are attracting soft-money leftovers on the theory that they will work hard next year to get Republican voters to the polls. The National Federation of Independent Business, the small-business lobby, for instance, has increased its highest membership category from $10,000 to $25,000 and now has two staffers soliciting major contributions. Americans for Tax Reform (ATR), another pro-Bush organization, is scouting for the most generous donations it can find. "I've tried to tell all the rich people I know about my fine work," says Grover Norquist, president of ATR.

The fact is, however, that neither Bush nor his party will need as much of the former soft money as the Democrats will. The President's campaign is on track to shatter its own fundraising record in 2000 ($101 million) by collecting at least $175 million and perhaps more than $200 million this time around. The Republican Party is also on a record-breaking pace thanks in large measure to sizable increases in the maximum amounts that individuals and PACs can contribute under the new law. The Democratic Party is making gains too, but no one expects Democrats to come close to Republicans on the money front in 2004.

Most experts even doubt that the Democrats' shadow organizations will be enough to allow the Dems to catch up. Prior to McCain-Feingold, both national parties lured soft money by promising donors personal meetings with senior elected officials. As distasteful as that sounds, it worked. But the new surrogate groups can't offer the same lobbying opportunity; they are prohibited from dealing directly with lawmakers or candidates. As a result, says Anthony Corrado, a Colby College campaign-finance professor, "the new groups are not going to amass the sums of money that the parties were capable of putting together prior to the new law. The donors used to think they needed to give in order to maintain their access on Capitol Hill, but the new groups don't provide that."

The people who will donate to these new organizations will have to feel strongly that George Bush must go. And those who do so will be investing in state-of-the-art political campaigns. ACT already has get-out-the-vote specialists canvassing homes in Ohio to identify the most virulent opponents of the President. When the effort is fully underway, says Jay Neel, ACT's director in the state, 4,000 people will go door-to-door, PalmPilots in hand, collecting detailed intelligence that will be fed into a giant database. The object, Neel says, is to register 200,000 new voters in all 88 counties and target each of them with the kind of information that will propel them to the polls on Election Day. Whether this works or is merely a pipe dream will depend on how widely the new money game is accepted by donors who have never dealt with anything like it before.

And what does this all mean for the regular old political parties? Both the Democratic National Committee and the Republican National Committee are not only still around, they're also raising more hard money than ever. That's the shorthand term for the small-chunk contributions (up to a grand total of $25,000 per calendar year from individuals, which is an increase from the old maximum of $20,000) that the new campaign-finance law allows the national parties to collect.

The Republican National Committee is raising so much hard money, in fact, that it could come close to replacing its soft-money losses. One reason: With the Republicans so thoroughly in control of Washington, petitioners are eager to please them. Few expect that the out-of-power Democratic Party can be as successful. "The DNC will not have the financial resources it had in prior presidential elections," Ickes says. "These groups were created in response to that." Whether George Bush is reelected may depend on their success.