527 Bill Splits Republicans

Battle lines have formed within the GOP, pitting the conservative Club for Growth and its allies against the party’s leadership, as the House prepares to take up new limits on 527s.

The Democrats’ steep advantage over the GOP in fundraising by the tax-exempt groups, which use a tax-code loophole to take in unlimited donations for political activity, led many Republicans to suggest that the crackdown created a partisan split. If Democrats did not embrace tighter regulation, Republicans would paint their support of the 2002 McCain-Feingold campaign-finance law as hypocritical.

But the Club for Growth is muddying the ideological waters, arguing that a Republican-backed 527 bill, even one that relaxes caps on aggregate contributions and coordinated campaign spending, violates the party’s core principle of deregulated political speech. Club for Growth President Pat Toomey (R-Pa.), who served in the House until 2004, has enlisted more than 20 right-leaning advocacy groups in his quest to derail the bill.

Incumbent lawmakers “are basically saying, ‘There are people out there criticizing me. … I have the power; I’ll shut them down.’ It’s outrageous, it’s appalling, it’s frighteningly similar to what despotic regimes do to newspapers and individuals who criticize them,” Toomey said in an interview late last week.

Co-signers of the Club’s letter of opposition to the House 527 bill include Americans for Tax Reform’s Grover Norquist, FreedomWorks’ Matt Kibbe, Citizens Against Government Waste’s Tom Schatz and conservative elder statesman Paul Weyrich. Even House Majority Leader John Boehner (R-Ohio), among his conference’s leading advocates of 527 regulation, gave a nod to the bill’s critics yesterday during a briefing with reporters.

“I understand their concerns, but we shouldn’t let the perfect become the enemy of the good,” Boehner said, referring to the argument that cash flowing to 527s, which must disclose their donors, already has begun shifting to 501(c) groups, which face far fewer reporting requirements.

The 527 bill slated for House consideration today is likely to resemble one offered by Reps. Christopher Shays (R-Conn.) and Marty Meehan (D-Mass.) that would require the groups to comply with Federal Election Commission (FEC) rules for PACs.

The Club’s explosive fundraising growth during this election cycle is not driving its position against the bill, Toomey asserted.

“This should not be about the fact that we’re doing well this year, which we are. It should be about the fact that we support conservative economic ideas, which we do,” Toomey said.

Yet the Club has not confined its alliances to conservative groups, working with Nan Aron, president of the liberal Alliance for Justice, and Democratic election counsel Bob Bauer for strategy sessions this week.

“Placing undue restrictions on 527s will chill voter participation, stunt voter registration and reduce voter turnout during an election year,” Aron said in a statement yesterday.

Some Republicans in the business world are holding their fire on the House’s 527 overhaul, however. Few corporate entities have developed 527s, relying on the 501(c) designation or confining political spending to their PACs.

“Most companies, particularly public corporations, were very reluctant to invest in 527s,” one business lobbyist said. “If your first duty is to your shareholders and you’re going to invest in a political entity that you really have no control over, but you wear whatever it is they do because of your disclosed association, that’s a risky proposition.”

One of the best-known corporate 527s is the November Fund, founded in 2004 by the U.S. Chamber of Commerce to combat trial-lawyer lobbying groups and former vice-presidential candidate John Edwards. But the Chamber supplied most of the November Fund’s financial backing, suggesting that it could easily reconstitute in another form if the House bill passes.

The business lobbyist acknowledged that his typical distaste for government regulation did not apply to 527 restrictions.

“Certainly we don’t have the ideological-purity argument that some anti-regulation folks have. Of all the anti-regulation issues out there, this one’s probably not a big one,” the lobbyist said.

Rep. Tom Cole (R-Okla.) is a member of the whip team assembling vote counts on the 527 bill, expected to be a tough sell in light of burgeoning opposition from the Republican Study Committee (RSC), to which Cole also belongs.

Cole pointed out the difficult predicament of disagreeing with conservative friends on 527 regulations but said Republicans would have to embrace compromise to ensure victory in November amid a Democratic 527 onslaught.

“You have to be politically realistic about this” issue, Cole said. “This is not right to life; it’s not as much of a moral question. … We need to recognize when our opponents have a weapon of this magnitude that they are using to destroy our majority. “To say ‘I want to be politically consistent’ and let our opponents destroy our majority seems politically misguided.”

Meanwhile, at least one conservative 527, the National Federation of Republican Women (NFRW), is not opposed to a bill that would chill its own fundraising.

“We acknowledge that any 527 reform bill may affect NFRW political activities,” President Beverly Davis said via e-mail. “However, the [NFRW] will work within the confines of the final 527 reform bill passed.”

And one frequent foe of the Club, the centrist Republican Main Street Partnership, is working actively to support the House 527 bill. Main Street had previously pushed to add 527 restrictions to the House’s lobbying and ethics reform package, which leaders had hoped to bring to the floor this week but swapped out for the 527 bill.

The Club is challenging Main Street members in at least two GOP primaries this year, backing conservative opponents to Rep. Joe Schwarz (R-Mich.) and Sen. Lincoln Chafee (R-R.I.).

Four of the 10 most active 527s for this election cycle are Republican- or conservative-leaning, according to PoliticalMoneyLine. Right-leaning 527s trail their left-leaning counterparts by about $2.5 million so far in the 2006 fundraising chase, a gap that topped $110 million by the end of the 2004 cycle.

Two of the highest-grossing GOP 527s, the Republican State Leadership Committee and the Republican Governors Association, are inactive on the federal level and not likely to be affected by the House bill, should it overcome Democratic opposition to pass the Senate. One election lawyer noted that the House bill must be phrased correctly to avoid inadvertently affecting nonfederal 527s.

“It is important that the legislation is drafted to reflect the current debate, which is about federal activity,” the lawyer said.