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DNC, State Parties Exchange Money to Circumvent Contribution Limits

By Scott Wilson
The Washington Post

A financially strapped Democratic National Committee has enlisted at least a dozen state parties in an effort to avoid limits on the use of large contributions for federal campaigns, a Washington Post computerized analysis of campaign finance reports shows.

In recent months, the DNC has collected more than $1 million from labor unions, corporations, and wealthy individuals that cannot be used directly for congressional and presidential races and handed that restricted money over to the state parties. In return, the state parties have sent back to the national committee unrestricted funds that can be spent on those contests, keeping a 10 to 15 percent commission for their assistance.

The DNC-engineered swap is one of the most aggressive to date and comes as the party, facing a multimillion-dollar debt, is eagerly seeking funds to finance congressional election campaigns less than seven months away. But campaign-finance reform advocates say the tactic, while legal, renders meaningless the federal distinction between so-called "soft money" campaign funds whose use is sharply restricted and unrestricted "hard money," providing the latest evidence yet of the need to tighten federal campaign finance laws.

"It shows the porousness of the system and exposes the myth that there is some separation between hard and soft money," said Don Simon, executive vice president of Common Cause.

DNC general counsel Joe Sandler, however, described the transfers as a way to ensure that "each party has more of the kind of money it needs," adding, "In our view, it's not only absolutely legal, but it's absolutely appropriate and ethical in every respect."

House Republican leaders this week agreed to schedule votes on stalled legislation that would effectively curb the money-swap practice and fund-raising abuses, by banning outright "soft money" donations to political parties.

Both political parties have previously avoided limitations on the use of soft money by funneling it through their state party affiliates to pay for advertising that indirectly promotes congressional and presidential candidates. In past election cycles, the DNC has orchestrated money swaps from one state party to another, and both parties have conducted limited swaps between their national committees and state affiliates. But the recent money exchanges between Democratic national and state party committees has never been conducted on such a large scale.

Hard money tends to be more valuable to national parties. It can be used for any purpose, including direct help for congressional and presidential candidates. But they can raise hard money only in limited amounts - $20,000 a year from any individual and $15,000 a year from any political action committee.