Critics of this provision distort the legislation. The bill does not "federalize" state parties in violation of the Tenth Amendment, or in any way restrict the kind or amount of money that state parties can raise. Nor does it in any way limit or regulate the money spent by state parties solely on state election activities. Instead, the Shays-Meehan legislation regulates state party activity only to the extent it affects federal elections, a provision that builds on a longstanding principle of the federal campaign finance laws and that is well within congressional power to regulate federal campaigns.

In sum, the soft money provisions of McCain-Feingold rest on a strong constitutional foundation. It is for this reason that 125 constitutional scholars signed a letter sponsored by the Brennan Center for Justice last fall expressing confidence that a ban on soft money would meet constitutional scrutiny. As that letter stated, "[C]losing the loophole for soft money contributions is in line with the longstanding and constitutional ban on corporate and union contributions in federal elections and with limits on the size of individuals contributions to amounts that are not corrupting."

Soft Money is not good for the parties

Despite the refrain from party officials that soft money is their life's blood, soft money hurts the political parties.

William Brock, former Senator and chair of the Republican Party has disputed the notion that soft money helps parties. "Not so," Brock said:

In truth, parties were stronger and closer to their roots before the advent of this loophole than they are today Far from reinvigorating the parties themselves, soft money has simply strengthened certain specific candidates and the few donors who can make huge contributions, while distracting parties from traditional grassroots work.

Republican Party leaders, including former Presidents Gerald Ford, George Bush and former Senate Majority Leader Robert Dole support a soft money ban. Ford said, "Our system of financing federal election campaigns is in serious trouble."

Republican presidential candidates Elizabeth Dole, Gary Bauer and Pat Buchan an support a soft money ban: Buchanan said recently, "I was against soft money in '95, I still am;" Bauer said recently, "I would support legislation that would cut off completely soft money donations to the two political parties."

Soft money violates Republican Party tenets by nationalizing campaign funding. The raising and spending of soft money is typically controlled by party officials and elected leaders in Washington, DC. This is in direct contradiction to the Republican philosophy of devolving power to states and local communities.

Soft money also contradicts Democratic Party values. By relying more and more on huge soft money contributions from corporations and wealthy individuals, the Democratic party has become estranged from its traditional constituencies, the middle class, minorities and low-income Americans.

Conclusion

Common Cause strongly urges the Committee to report legislation that will put an end to the soft money loophole now eroding the integrity of the federal election laws.

The CHAIRMAN. Thank you, Mr. Harshbarger.

Mr. Kolb?

STATEMENT OF MR. KOLB

Mr. KOLB. Thank you very much, Mr. Chairman and for inviting me to testify on behalf of CED at your hearing today.

I am speaking on behalf of the Committee for Economic Development, which is a six-decade-old independent research and policy organization of some 220 business leaders and prominent university presidents. On their behalf and the many other corporate executives who are working with us on campaign finance reform, I appreciate very much the opportunity to present and discuss our views on campaign finance reform.

As a business-led organization, CED offers a unique perspective on this important issue. Business leaders are significant participants in the system as contributors. Corporations, after all, are the

largest source of soft money, and as civic leaders, CED trustees are concerned about the impact this system is having on our democ

racy.

Over the past year, we have attempted to educate more Americans about why reforming our nation's campaign finance laws is so important, how and why the current broken system is harming our democracy as well as the business community, and how many business leaders view the issue. We believe we have put to rest the idea that the business community monolithically supports the status quo, loves giving ever-increasing amounts of soft money, is unconcerned about the damage the system is doing to our democracy, and opposes real far-reaching reform.

Today, I would like to share with you the details of CED's campaign finance reform proposal. I will also focus on some specific issues surrounding political parties and soft money.

CED's campaign finance reform work was led by a special subcommittee co-chaired by Edward A. Kangas, the chairman of the Global Board of Directors of Deloitte Touche Tohmatsu, and George Rupp, the president of Columbia University. Since we released our campaign finance reform recommendations last year, they have been endorsed by more than 200 prominent business and civic leaders from around the country.

Let me briefly outline what we believe are the major problems with the current system. Simply put, we believe the current system no longer works for anyone, not elected voters, not the business community, and especially not for democracy's shareholders, the voters-and we are convinced the status quo threatens our economic and business climate.

Today, money and fund-raising have become too important and demanding in our political life. There is too little competition in campaigns. There has been a dramatic shift from small-dollar donors to big givers, and unregulated money is simply out of control. Those are the major problems, but let me also state what we do not think the problem is.

Business leaders do not believe that all political contributions are bad or that they are corrupting. Voluntary political contributions from individuals are good for our democracy, and we should encourage more giving, but CED makes important distinctions between types of money, hard versus soft, individual contributions versus money from corporate and union treasuries, and we recognize the importance of good, transparent rules of engagement.

So what does CED think we should do about these problems? First and foremost, soft money must be banned.

Second, we recognize that campaigns cost money and we should not take steps that would increase the fund-raising burden or inhibit robust political debate. For those reasons, we recommend increasing the individual contribution limit from $1,000 to $3,000. The quarter-century old limit is out of date and it is unrealistic. It should be changed.

To enhance the role of small donors and provide challengers with increased access to resources, we propose publicly financed 2-to-1 matching funds for individual donations of up to $200 for congressional candidates who agree to abide by voluntary spending limits.

Such a system would increase the value of small contributions and provide an incentive for candidates to seek them.

I know many people have been surprised that a group of corporate executives would support a system of partial public financing, but as several of them have put it, if improving the integrity and the quality of American elections is not a good use of public money, then what is?

Third, our reform plan would set overall spending limits for those candidates who would accept public financing.

Fourth, we believe Congress must reform so-called issue advocacy by expanding the definition of "express advocacy" within specified periods before elections.

Together, we believe these reforms will produce more competitive elections, improve the quality of representation, and promote public confidence in our political process. It is a balanced, realistic, and a pragmatic package.

Now I would like to address the issue of political parties and campaign finance reform. First, let me stress that political parties and their committees play a very important, critical role in our system. Reforms should ensure that they can continue to do so with adequate resources.

We recognize that a ban on soft money could have significant impact on political party finances, and, therefore, to partially compensate for this loss, we recommend changing the rules limiting individual contributions to Federal candidates and political committees.

Under current law, individuals are limited to an annual total of $25,000 for all contributions made to Federal candidates, PACS, and party committees. CED proposes that Congress establish two separate aggregate limits for individuals. The first would limit the total amount contributed by an individual to Federal candidates and PACS to $25,000 annually. The second separate ceiling would limit the total amount contributed by an individual to national party committees to $25,000 annually.

Most importantly, however, soft money must be eliminated. The basic principle on which our campaign finance laws are based, that campaigns should be financed by individuals within reasonable limits and not corporations and not unions, is a sound principle. Soft money, in our view, violates this principle. It also contributes to the understandable cynicism of the American people about money and politics. Calling soft money-financed ads that clearly promote or attack a candidate "issue ads" is making a distinction. without a difference. The American people know it. Members of Congress know it. The fund-raisers know it, and the funders of the ads know it. No one is being fooled. The pretense here only fuels the cynicism that is damaging our democracy.

But CED is most concerned about the corrupting influence of soft money. For these and other executives, it is extremely hard to say no to solicitations for soft-money contributions. To quote our campaign finance reform co-chairman, Ed Kangas from Deloitte Touche Tohmatsu, "Unlike individual donations, most large corporate contributions aren't made as gestures of goodwill or for ideological reasons. Corporations are thinking of the bottom line. Will the con

tribution help or hurt my company? Everyone knows big checks get noticed."

He goes on to say, quoting from the New York Times in October of last year, "For a growing number of executives, there is no question that the unrelenting pressure for five-and six-figure political contributions amounts to influence peddling and a corrupting influence. What has been called legalized bribery looks like extortion to us. The threat may be veiled, but the message is clear. Failing to donate could hurt your company. You must weigh whether you meet your responsibility to your shareholders better by investing the money in the company or by sending it to Washington."

Over the last year or so, I have heard story after story from corporate executives about their being hit up for ever-larger contributions, and trust me, they do not like it.

Mr. Chairman, let me close by reiterating our strong view that enacting real reform is long overdue. Today, no one can or should defend the current system. It simply has to be changed, and let me stress that there should be no doubt that the American people and a growing number of business leaders want that change now.

As CED's reform co-chair, Ed Kangas, wrote in Monday's Washington Post, "Those who say the public does not care about campaign finance skip over the McCain phenomenon and the fact that every poll shows voters support reform by wide margins. Those who say business leaders love the constant soft-money shakedown have not been in a corporate boardroom lately, and those who say big political contributions are not corrupting elections and government are denying what Wall Street and Main Street both know." I am convinced that if Congress does not heed America's call for reform, it will only deepen the cynicism and the disaffection that is already too high. I would like to quote from one very keen observer and participant in our political system testifying before Congress a number of years ago. He said that big money "eats at the heart of the democratic process. It feeds the growth of special interest groups created solely to channel money into political campaigns. It creates the impression that every candidate is bought and owned by the biggest givers, and it causes elected officials to devote more time to raising money than their political duties. If present trends continue"-this statement was made in 1983-"If present trends continue, voter participation will drop significantly. Public respect will fall to an all-time low. Political campaigns will be controlled by slick packaging artists, and neglect of public duties by absentee officials will undermine Government operations." That was former Senator Barry Goldwater in 1983. I do not know. Maybe there is something, Mr. Chairman, about the water and drinking the water in Arizona that results in these views, but I think

The CHAIRMAN. Must be.

Mr. KOLB. Senator Goldwater's views, I think are worth considering. Mr. Chairman, thank you very much for the opportunity to share CED's views with you and the committee.

[The prepared statement of Mr. Kolb follows:]

PREPARED STATEMENT OF CHARLES E.M. KOLB, PRESIDENT, COMMITTEE FOR
ECONOMIC DEVELOPMENT, WASHINGTON, DC

Mr. Chairman, Senator Dodd, and members of the Committee. Thank you for inviting me to testify at today's hearing. On behalf of the Committee for Economic Development (CED), I appreciate the opportunity to present and discuss our views on campaign finance reform.

As a business-led organization, CED offers a unique perspective on this important issue. Business leaders are significant participants in the system as contributors. Corporations are the largest source of soft money. And, as civic leaders, CED trustees are concerned about the impact this system is having on our democracy.

Over the past year, we have attempted to educate more Americans about why reforming our nation's campaign finance laws is so important, how and why the current broken system is harming our democracy and the business community, and how many business leaders view the issue.

We hope we have contributed to the debate in a positive way. We believe we have put to rest the idea that the business community monolithically supports the status quo, loves giving ever-increasing amounts of soft money, is unconcerned about the damage the system is doing to our democracy, and opposes real, far-reaching reform. This morning, I'd like to tell you about CED's campaign finance reform proposal, which is outlined in the report we released a year ago, entitled Investing in the People's Business: A Business Proposal for Campaign Finance Reform. I encourage this Committee to review this report, which we shared with you and is available on our Web site (www.ced.org). I also want to share with you some of the insights we have gained from business leaders as we developed this proposal and shared it with others. I will also focus on some specific issues surrounding political parties and soft money.

But first, let me tell you what CED is and how we developed our recommendations. CED was formed nearly 60 years ago by corporate executives. Today, we remain an independent research and policy organization of some 220 business leaders and prominent university presidents. We are a nonprofit, nonpartisan organization dedicated to studying and proposing policies that promote steady economic growth, increased productivity and living standards, greater and more equal opportunity for every citizen, and an improved quality of life for all.

All CED policy recommendations are approved by a Research and Policy Committee of our trustees. Our campaign finance reform work was led by a special subcommittee, co-chaired by Edward A. Kangas, the Chairman of the Global Board of Directors of Deloitte Touche Tohmatsu, and George Rupp, the President of Columbia University. Since we have unveiled our campaign finance reform recommendations, they have been endorsed by more than 200 prominent business and civic leaders from throughout the country. The endorsers include top executives of Deloitte Touche Tohmatsu, Sara Lee, John Hancock Mutual Life Insurance, State Farm, Prudential, H&R Block, ITT Industries, Motorola, Hasbro, the MONY Group, Chubb, Goldman Sachs, Boston Properties, and Saloman Smith Barney. They also include the retired chairmen or CEOs of AlliedSignal, BankAmerica, GTE, International Paper, Union Pacific, General Foods, Monsanto, Time, CBS, Fannie Mae, Dow Chemical, Texaco, FMC, and BFGoodrich.

CED's Perspective on the Problem

Let me briefly outline what we believe are the major problems with the current system. Simply put, we believe the current system no longer works for anyone-not elected officials nor the business community, and especially not for democracy's shareholders, the voters.

And we are convinced that the status quo threatens our economic and business climate. As our report states, "A vibrant economy and well-functioning business system will not remain viable in an environment of real or perceived corruption, which will corrode confidence in government and business. If public policy decisions are made or appear to be made on the basis of political contributions, not only will policy be suspect, but its uncertain and arbitrary character will make business planning less effective and the economy less productive."

The specific problems can be broken down into four key areas:

1. The Money Chase: Today, money and fundraising have become too important and demanding in our political life. There is simply too much time spent by elected officials chasing after dollars that are buying influence and access. Our busy corporate executives are appalled by the amount of time senators and congressmen spend on fundraising, leaving too little time for you to do the people s business. We are also concerned that the escalating arms race for cash has devolved into an