Q: First of all, when Congress came up with these numbers -- the limits on contributions -- why did they do that?
Potter: They came up with the numbers in 1974 as part of the post-Watergate reform. The view was that Watergate was a couple of different things. It was, first off, a break-in and all the rest of it. But it was, beyond that, a scandal because of the amount of money spent in the 1972 Presidential election. The sense that individuals who had money were giving far more than was, in some undefined way, proper.
And thus one of the things that Congress did was it said, "We're going to create a system in which all this is gonna be disclosed," which was a huge step forward because, before that, it largely hadn't been. "But, we're also going to put limits on how much individuals can give and how much candidates can spend." The figures . . . there's no rhyme or reason to them. The thousand dollars per election that an individual can give to a federal candidate sounded like a good round number. One of the interesting aspects to that, of course, is that it wasn't indexed to inflation, so that today that thousand dollars is in today's money about 400 and something dollars.
Q: And they've never changed the numbers?
Potter: No.
Q: It was a thousand then, twenty years ago. It's a thousand now.
Potter: That's right.
Q: Why did they come up with a different number, five thousand dollars for these PAC's, these groups of people?
Potter: Well, it's important to remember that we hadn't had any great experience with PAC's at that stage, first, so there weren't large numbers of PAC's. Secondly, PAC's were a labor union creation. At the time there were virtually no corporate PAC's so this was part of the bargaining process that we traditionally see when the two parties in Congress are trying to write campaign finance legislation.
And at that time, there was a Democratic majority in Congress and one of the things they wanted to do, as part of their agenda, was to ensure that their sources of funding weren't cut off. And there had always been labor PAC's that gave to Democratic candidates. So it was part of the legitimate bargaining back and forth between the parties trying to reach a bipartisan bill, there was a provision put in that allowed PAC's, political action committees, to give five thousand dollars to a candidate. . .
The theory behind it was that -- and still is -- that it is an aggregation, a collection of small individual contributions, because, as you know, people who give to a political action committee, if it's associated with either a labor union or a corporation, tend to give fairly small amounts. They are all then piled together and so the PAC then has a couple hundred thousand dollars which it can give to candidates. So the thinking was it was somehow less corrupt to have a PAC give five thousand dollars to a candidate because that whole five thousand didn't come from one individual but from all of the employees or all of the members of the union.
Q: Let me get this down to folkloric images. The bad thing was some big businessman or big labor chief with a valise filled with money handing it off to you in a taxi cab or something?
Potter: There are two elements to that. One is handing it off in a taxi cab, the disclosure side. The sense was it was bad for there to be money in the system that was secret, that somebody was buying influence and nobody was going to know about it. And if you disclosed it -- sunlight is the best disinfection and the rest of it -- then everybody could make their own judgments. So that's the disclosure side of those sides.
There was also, though, a sense that large contributions are, per se, somehow wrong, that it is better to have small contributions. And it isn't just folklore because there were specific examples. The 1972 Nixon campaign example is the famous W. Clement Stone contribution of two million dollars to the Nixon re-election campaign.
Q: Two million dollars from one guy?
Potter: From one person.
Q: Now once these contribution limits go into place, one thousand for individuals and five thousand for PACs, it's my sense that the business of getting elected to something becomes far more expensive. Is that right?
Potter: We are a busy commercial society. There are more ways to communicate now than there were twenty years ago. Whereas in the old days people might watch just one or two channels, they're now watching the proverbial five hundred or at least a couple dozen. As a result of all that, it is more expensive to communicate with voters. Also, political pros have figured out more ways to spend money on campaigns.
The whole world of campaigning has changed. We've gone in our lifetimes from a situation where candidates routinely spent maybe 10, 20, 30, 40 thousand dollars even in Senate races. At the time the Watergate laws were enacted, there were members of the Senate who spent a couple hundred dollars on their re-election campaigns. That just doesn't exist anymore. Instead you have the need to buy television and radio time, which is more expensive. . .
I don't know whether it's more expensive on an inflation-adjusted basis or not, but it certainly costs have gone up. And candidates have figured out other ways to reach targeted voters which cost more money. Telephone banks cost money. Special mailings cost money. Computer generated lists, the whole computer revolution is a more efficient way, perhaps, to campaign, but clearly a more expensive way. The limits mean not that the costs of all that goes up but that raising the money to pay for all that becomes more difficult. . . .
What it's specifically done is it has made it harder for challengers to raise that money. In that sense, it has, I think, in an unintended way, really shifted the playing field, because incumbent members of Congress have access to the PAC money, they have a relatively high profile, and they have a fair amount of free publicity merely because they're Senator so and so and they choose to hold a press conference. Plus, they've actually got some hidden public funding in terms of a large Congressional staff that will do campaign work . . . the ability to communicate with constituents through House and Senate television studios, things like that.
On the other side of the equation, the challenger, faced with relatively high costs, often finds it difficult to find PAC's that will give to him or to her and doesn't have this same circle of well-off acquaintances and doesn't have any of the free publicity that a member of Congress is gonna have. So we've ended up with a system that unintentionally slants the fund-raising in favor of incumbents.
Q: Doesn't it also have this effect? If once upon a time, I could go to you and I could say, "Give me a hundred grand." And you could. I could go to ten people, a million dollars. Now to get a million dollars I've got to ask a thousand people.
Potter: It's a big difference . . . There are a lot of problems with the election laws, with this whole campaign-finance system. One is that people, by and large, don't think about the consequences when they enact the rules.
We've done this for this entire century. You have a cycle where you have a scandal. There is a problem with money. There was a problem with money in Theodore Roosevelt's election in 1904 and Congress passed the first election laws then, prohibiting corporate contributions. All through this century, what we've seen is a problem with money, a scandal, Congressional hearings, new legislation enacted in the heat of the moment with a lot of public pressure, with members of Congress trying to stab the other person in the back, enact legislation which hurts the other party more than them, without any real look at the long-term consequences. Then everyone walks away from it and expects the system to work.
In answer to your question, no I don't think people said, "If we enact this legislation, candidates are going to spend a lot more time fund-raising." They said, "If we enact reform, the system will be better." And I think one of the lessons we should have learned through this whole series of reforms in the early part of the century, in the 1920s after Teapot Dome, in the 1940s, and certainly after Watergate, is that change doesn't necessarily mean reform. And change has all sorts of unintended consequences.
What happened is you had the people like Eugene McCarthy who campaigned against Lyndon Johnson in New Hampshire in 1968 suing to overturn the Watergate reforms, saying, "If these had been in place, I couldn't have campaigned because I had what you're describing. I had one or two people who were willing to support me with substantial amounts of money. And if I were campaigning against an incumbent President and I had to raise this in thousand dollars increments, I wouldn't get ten people in the room to do it and I couldn't have run that race. And this is a violation of my right of free speech and participating in the political process."
Q: Do politicians today spend much more time raising money than they did, say, 25 years ago?
Potter: Every member of Congress says so. People leave the House and the Senate saying they're spending too much time, they're getting eaten alive by the amount of time they're spending raising that money.
Q: How did this huge loophole called soft money happen?
Potter: [W]hat happened was you again had the law of unintended consequences. When these federal laws were passed in 1974, nobody sat back and said, "Wait a minute. We exist in a system with both federal elections and state and local elections. We've got 50 states. We have 50 state parties for the Republicans and the Democrats. They have different rules." Nobody thought about that at all. They said, "We're going to govern federal election law. We're gonna pass these limits."
Took a couple of years for people looking at this to say, "Well, what are the federal laws regulating state parties? What are the federal laws regulating the Republican and Democratic parties in Washington if they're involved in state and local election and in encouraging people to register as Republicans or getting out a general Republican message? Well," they said, "there aren't any federal laws about state activity because that's, by definition, state."
And so what that means, then, is that if you give to the Wyoming Republicans or the Ohio Republicans or the Vermont Republicans, nobody asks you any questions?
Potter: Initially nobody asked you any questions. The next step was people said, "Well if that's true, why can't we give to the Republicans and Democrats in Washington but for what we'll call a state elections account. And it will only be used for state law and nobody will ask any questions and nobody will know. " Then you had a reaction against that by Common Cause and other groups that said, "Wait a minute. This surely is not intended." And they went to court and they sued and we've ended up now with a hybrid system, where the money can be given for state and local election purposes, but it has to be disclosed if it is given to the Republican or Democratic parties in Washington as a matter of federal law.
Q: Is there any limit on giving to the Republican party or the Democratic party in Washington?
Potter: No.
Q: None at all?
Potter: Not if it is not for federal races.
Q: So if in 1996, a federal election year, I give a huge amount of money to the Republican party, do I have to assure somebody that this will all go to candidates in state races and not to a single race for Congress or single race for the White House?
Potter: Yes, what you do is, in that situation, because 1996 is a federal year, it's also a state and local year. You're gonna be electing state legislatures all across the country. You're gonna be electing governors all across the country . . .
The money goes into a non-federal account that says on it, "The state and local elections account." It isn't put in the general account. It's put in this separate account . . .
The question always is, given that money is fungible, what is it spent for and does it have an effect on the federal races and do people who give to that account think they're having an effect on the federal race? And will the federal candidates be grateful because somebody gave the national committee party-building money for non-federal purposes which freed up some federal money for something else?
. . . [A]nd the answer is sure, that's why you have Presidential candidates out there raising non-federal money because it helps the whole party.
Q: Assuming there's something broken or seems kind of a mess with this, how would you fix it?
Potter: Everybody, I think, who discusses this subject says, "I'd like to make some changes. What we have doesn't make sense. It isn't a system even. . . ."
One of the ideas that I've supported for some time is the notion of a non-partisan independent commission that would actually sit down and look at this because I think you'd need to recognize that any changes have to come through Congress. Congress has a significant stake in this. Congress is composed of the two major parties that are at each other's throats on this issue. At the moment, the people who are having to discuss this and make decisions are going to run on these rules this fall. Or next year.
And they're under tremendous pressure from their party committees who are looking at it, saying, "It affects us and our Presidential candidates." It seems to me very helpful to have people who are not going to potentially lose their job as a result of the way this law is amended.
Q: Do you have a short list of things you'd like to see?
Potter: One is that I think we've ended up with an over-technical system, so I would like to see it simplified. Everything we've been discussing indicates that you need a primer to work your way through this. And I don't think that makes sense. . . .
I think I'm wary and most people are wary of saying here is the one answer 'cause there isn't a silver bullet. There isn't a "if I could wave a wand, here's how it would come out."
