APPENDIX 11.

Questions from Chairman McConnell for Senators

Thompson and Lieberman

Question 1. S. 1991 contains a provision making clear what the FEC and most everyone in the Senate has said all along, that the ban on foreign contributions includes "soft money" contributions from foreign individuals and entities. The bill also contains a provision exempting domestic subsidiaries of foreign corporations from the prohibition on foreign contributions. I agree with the logic behind the exemption for domestic subsidiaries-that an entity's political activity should not be curtailed in the absence of actual evidence of corruption.

Nevertheless, the primary rationale for campaign finance "reform” is the need to reduce not only actual corruption, but also the "appearance of corruption," even when there is a complete absence of any actual corruption. Some have argued that this exemption for domestic subsidiaries is a fatal flaw because it permits a continuing appearance of corruption if an independent, domestic subsidiary of a Chinese corporation can make contributions to the Democratic and Republican parties.

What is your response to those who argue that the domestic subsidiary exemption is a dangerous loophole that ignores concerns about the appearance of corruption?

Answer from Senator Thompson:

S. 1991 contains a provision making clear what the FEC and most everyone in the Senate has said all along, that the ban on foreign contributions includes "soft money" contributions from foreign individuals and entities. The bill also contains a provision exempting domestic subsidiaries of foreign corporations from the prohibition on foreign contributions. I agree with the logic behind the exemption for domestic subsidiaries-that an entity's political activity should not be curtailed in the absence of actual evidence of corruption.

Nevertheless, the primary rationale for campaign finance "reform" is the need to reduce not only actual corruption, but also the "appearance of corruption," even when there is a complete absence of any actual corruption. Some have argued that this exemption for domestic subsidiaries is a fatal flaw because it permits a continuing appearance of corruption if an independent, domestic subsidiary of a Chinese corporation can make contributions to the Democratic and Republican parties.

The purpose of the provision you asked about is to ban soft money from foreign sources-something we all thought was already

prohibited prior to 1996. Out of a sense of fairness, we exempt domestic subsidiaries. If under current rules, other domestic companies are allowed to donate, then those companies employing domestic workers and deriving sufficient funds from domestic sources should be able to participate as well.

Also, the prohibition against foreign contributions is not primarily based upon a concern over corruption. It is based upon a desire not to have foreign citizens, countries or governments influence our elections. Of course, large amounts of foreign soft money would raise the same potential corruption issues that large amounts of domestic soft money would raise. That concern, of course, is based upon the notion that it is not good for our body politic to have unlimited amounts of money going to the benefit of those who are passing judgment on matters of great importance to those who are donating the money.

Answer from Senator Lieberman:

Thank you for the opportunity to testify on March 29, 2000 before the Rules Committee on S.1991, legislation Senator Fred Thompson and I introduced to ensure that prosecutors have the tools necessary to appropriately prosecute and punish those who violate existing campaign finance laws. Subsequent to the hearing, you asked us to provide further information on Section 4 of the bill, a provision that clarifies the current law banning political contributions from foreign nationals.

As you know, prior to the 1996 elections, no one doubted that the Federal Election Campaign Act ("FECA") banned any type of donation-hard money or soft-from foreign nationals who are not lawful permanent residents of the United States. Since then, however, some courts and commentators have suggested otherwise, opining that FECA prohibits foreign nationals from donating hard money, but not soft money. Section 4 of S. 1991 would put these arguments to rest by stating clearly that foreign nationals who are now lawful permanent residents may not make any type of donation to a candidate or political party.

As your post-hearing question points out, Section 4 states that its foreign money ban would not encompass donations made by a US subsidiary of a foreign company if the subsidiary uses money it made in the United States. Respectfully, we did not, as you suggest, include this provision out of concern that "an entity's political activity should not be curtailed in the absence of actual evidence of corruption." Indeed, both Senator Thompson and I would prefer to ban all soft money contributions-including from domestic as well as foreign corporations-a position we believe is fully justified under Supreme Court decisions including this year's Nixon v. Shrink Missouri Government PAC, holding that Congress may regulate campaign contributions to address not only the actuality, but also the appearance of corruption. See also Austin v. Michigan Chamber of Commerce, 494 U.S. 652(1990) (upholding ban on use of general corporate treasury funds to make independent expenditures).

We understand, however, that you and many others do not share this view. For that reason-and because we truly believe that the goal of our bill is one on which we can and should be able to reach

common ground-we tried to keep our bill as narrow and noncontroversial as possible to address the specific problems that were revealed as prosecutors attempted to pursue those who egregiously violated the campaign finance laws in 1996. With respect to Section 4, that meant making clear that our proposal aims only at keeping foreign money out of the US political system, and is not intended to prevent any US company from using US-generated money to make political contributions.

Question from Chairman McConnell to Mr. Cressman

Question 1. Throughout his testimony, Mr. Cressman relies on public opinion surveys to justify his position that contribution limits should be lowered. He does, however, fail to mention some public opinion polls that provide a more complete picture of the public's views on contribution limits. For example, Mr. Cressman places great emphasis on a poll indicating that 77 percent of the public supports lower contribution limits. He does not mention, and is perhaps unaware, that in a more recent poll conducted by the Washington Post, a publication that has put its all into pushing the "reform" agenda, only 61 percent of the public actually knew there were any contribution limits. More importantly, this poll revealed that when citizens were asked what they believe current contribution limits are, the mean response was $62,000. That is 62 times the actual individual limit. So even if 77 percent of Americans support lower limits, most of them may think that $10,000, $20,000 or even $50,000 is a lower limit since most citizens greatly overestimate the current limits.

I think it is also important to note some public opinion polls that challenge Mr. Cressman's assertion that the public views money as the "cornerstone of a successful race." As a realist, I of course would not deny that it is vital for candidates to have the resources to get their message out. But, also as a realist, I would not say that money has the singular importance Mr. Cressman claims the public attributes to it. And public opinion surveys demonstrate that the public does not view money as the most important aspect of a campaign. In fact, public opinion polls show that 61 percent of Americans believe that a newspaper-preferred candidate trumps the better funded candidate and that 68 percent of Americans believe that newspaper editorials are more important that $10,000 contributions, which are illegal under current law. This is why 86 percent of Americans want newspapers to provide equal coverage to candidates against whom they editorialize.

Mr. Cressman's argument that contribution limits should be lowered is also challenged by the experience of jurisdictions that have lowered their limits-jurisdictions that Mr. Cressman singles out as an example for others to follow. For example, Mr. Cressman mentions California as a state that has moved to lower contribution limits. Thus, I think it important to note what happened in California after those low

limits were enacted. First, California's low limnits were declared unconstitutional in California Pro-Life v. Scully. Then, after self-styled reform groups spent huge sums of money to reinstate contribution limits in California by ballot initiative, their scheme was rejected by a margin of almost two to one, just a few short weeks ago. I think it reasonable to conclude that the resounding defeat of the well-funded ballot initiative in California calls into question the six yearold poll numbers Mr. Cressman cites to support his assertion that the public clamors for lower contribution limits.

Mr. Cressman also lauds Colorado as an exemplary state that has adopted low contribution limits. So again, let's take a look at what has actually happened in Colorado. Stuart Rothenberg, hardly an enemy of reform, reported in Roll Call that Colorado's low contribution limits “instead of making candidates more responsible for the campaign environment...actually encourages independent forces to become active." According to Mr. Rothenberg, after the low limits went into effect, the power of wealthy "special interests" that could afford to run independent expenditure ad campaigns increased. Candidates were left at the mercy of these groups. Rothenberg concludes that in Colorado the advocates for low limits "ignored the realities of political campaigns," and created a situation where wealthy special interests wage campaigns on behalf of their preferred candidates while the candidates, unable to muster the resources for a serious campaign, are left on the sideline begging for support from groups capable of running independent expenditures.

The same thing happened in another jurisdiction that Mr. Cressman praises for enacting low contribution limits-the District of Columbia. The New York Times, which editorializes in favor of reform more than it does any other issue, published an article stating that "limiting candidates' spending usually succeeds only in giving special interests even more clout." Again, this is in the New York Times! The same article goes on to explain that the $100 contribution limits for which Mr. Cressman praises the District of Columbia made it so difficult to raise money that "candidates struggle mightily to raise even $30,000, and couldn't get their message to voters." According to the New York Times, during a mayoral election operated under these low limits, while there were many candidates in the race, voters knew nothing about them because they had such a hard time raising money that many D.C. residents "didn't receive a single political flier or piece of mail" from the candidates discussing their credentials or positions. The article goes on to explain that "special interests filled the vacuum. Unions and big business set up independent campaigns to help the candidates of their liking while politicians were reduced to begging them for support." This New York Times article points out that after living through one mayoral election with $100 contribution limits, D.C. City Council voted to return to the old limit of $2,000.

In short, Mr. Cressman and U.S. PIRG are urging Congress to do something that has been proven in the very places Mr. Cressman holds up as his ideal jurisdictions to silence candidates and leave elections to independent expenditure groups and other political actors that can not be held accountable by voters. It does not take a rocket scientist to conclude that if lower limits made D.C. mayoral candidates bystanders on the sidelines of their own campaigns, which were fought by surrogates above the heads of the impoverished candidates, federal candidates would be left in an even more impossible position of Congress lowered the limits on contributions. Since even members of Congress in favor of further regulation of the political process concede that we cannot constitutionally limit expenditures by wealthy candidates and independent ad groups, it seems clear that it is bad public policy to further reduce the ability of ordinary candidates to compete with these actors in the political process.

Now, Mr. Cressman, why does your organization think that it is good public policy to lower contribution limits-a policy that has been proven to have the effect of giving control of elections to independently wealthy candidates and wealthy groups that can afford independent ad campaigns? Answer:

Thank you for your question. It is important to thoroughly examine the complicated issue of campaign finance reform. U.S. PIRG supports lower contribution limits for the reasons outlined in my testimony, namely that it will require candidates to raise funds from, and hence be accountable to, ordinary citizens-not wealthy interests.

In regard to other points you raise in your question:

(1) Every experience we have in talking to the public indicates that they strongly support lower contribution limits. The fact that a Washington Post poll found many citizens are unaware of the current limit or think it is higher than it actually is, is most likely due to the media's fixation with soft money, which, as you know, is unlimited. Due to the great many stories about soft money, it is quite understandable for most citizens to assume there are either no limits or else very high limits on federal campaign money, even though this is not technically correct. This does not mean, however, that citizens do not want lower limits. As I mentioned in my testimony, in states where citizens have the initiative process, they have repeatedly supported contribution limits much lower than the current federal limits. In no case did citizens put a measure on the ballot to increase contribution limits, and in all cases where low limit reforms were put on the ballot they passed by overwhelming margins. Also, a very recent poll by the Mellman group found that 81 percent of the public opposes raising the $1000 federal contribution limit.

(2) In regards to the primacy of money in determining elections, the reason why the public believes that money determines election outcomes is precisely because it usually does. As I stated in my testimony, 95 percent of the candidates who spent the most money in