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The Influence of Section 527 Committees
By Discover The Networks

The growing influence of "Section 527" organizations is closely tied to the political maneuverings of the leftist billionaire George Soros, who was able to exploit the power of 527s to a degree that was unprecedented in American politics.

in 2003-04, Soros was convinced that the U.S. government under President Bush had become aggressive, dangerous, and oppressive. In an effort to combat that perceived development, he set out to "puncture the bubble of American supremacy." To accomplish this, he would create a political apparatus of extraordinary influence.

Soros had quietly laid the groundwork for this apparatus during the preceding eight years. Most notably, between 1994 and 2002 the billionaire had spent millions of dollars promoting the passage of the Bipartisan Campaign Reform Act -- better known as the McCain-Feingold Act -- which was signed into law in November 2002 by President Bush.

The stated purpose of McCain-Feingold was to purge politics of corruption by: (a) putting restrictions on paid advertising during the weeks just prior to political elections, and (b) tightly regulating the amount of money that political parties and candidates could accept from donors. Vis à vis the former of those two provisions, the new legislation barred private organizations―including unions, corporations, and citizen activist groups―from advertising for or against any candidate for federal office on television or radio during the 60 days preceding an election, and during the 30 days preceding a primary. During these blackout periods, only official political parties would be permitted to engage in “express advocacy” advertising―i.e., political ads that expressly urged voters to “vote for” or “vote against” a specified candidate. Equally important, major media networks were exempted from McCain-Feingold's constraints; thus they were free to speak about candidates in any manner they wished during their regular programming and news broadcasts. This would inevitably be a positive development for Democrats, who enjoyed the near-universal support of America's leading media outlets.

In addition to its limits on pre-election political advertising, McCain-Feingold also placed onerous new restrictions on the types of donations which candidates, parties, and political action committees (PACs) could now accept. Previously, they had been permitted to take two types of contributions. One of these was “hard money,” which referred to funds earmarked for the purpose of express advocacy. Federal Election Commission (FEC) regulations stipulated that in a single calendar year, no hard-money donor could give more than $1,000 to any particular candidate, no more than $5,000 to a PAC, and no more than $20,000 to any political party.

The other category of pre-McCain-Feingold donations was “soft-money,” which donors were permitted to give directly to a political party in amounts unlimited by law. But to qualify for designation as “soft money,” a donation could not be used to fund “express advocacy” ads on behalf of any particular candidate. Rather, it had to be used to pay for such things as “voter-education” ads or “issue-oriented” ads―political messages that carefully refrained from making explicit calls to “vote for” or “vote against” any specific candidate. So long as an ad steered clear of uttering such forbidden instructions, there was no limit as to how much soft money could be spent on its production and dissemination.

McCain-Feingold raised the per-donor maximum for certain hard-money donations: A donor could now give up to $2,000 to a candidate, $5,000 to a PAC, and $25,000 to a political party. But the new law banned soft-money contributions to political parties altogether.

Historically, Republicans had enjoyed a 2-1 advantage over Democrats in raising hard money from individual donors. Democrats had relied much more heavily on soft money from large institutions such as labor unions. Thus it seems counter-intuitive that Soros, who clearly favored Democrats over Republicans, would seek to push legislation whose net effect―the removal of soft money―would be unfavorable to Democratic Party fundraising efforts.

But Soros's motive becomes clear when we look at the types of organizations whose fundraising activities were left unaffected by McCain-Feingold. These were “527 committees”―nonprofits named after Section 527 of the IRS code―which, unlike ordinary PACS, were not required to register with the FEC. Run mostly by special-interest groups, these 527s were technically supposed to be independent of, and unaffiliated with, any party or candidate. As such, they were permitted to raise soft money―in amounts unbound by any legal limits―for all manner of political activities other than express advocacy. That is, so long as a 527's soft money was not being used to pay for ads explicitly urging people to cast their ballots either for or against any particular candidate, the letter of the McCain-Feingold law technically was being followed. Practically speaking, of course, such things as “issue-oriented ads” and “voter-education” ads can easily be tailored to favor one party or candidate over another, while carefully steering clear of “express advocacy.”

Once McCain-Feingold was in place, Soros and his political allies collaborated to set up a network of “527 committees” ready to receive the soft money that individual donors and big labor unions normally would have given directly to the Democratic Party. These 527s could then use that money to fund issue-oriented ads, voter-education initiatives, get-out-the-vote drives, and other “party-building” activities―not only to help elect Democratic candidates in 2004, but more broadly to guide the Democratic Party ever-further leftward and to reject the “closed” society that Bush and the Republicans presumably favored. By helping to push McCain-Feingold through Congress, Soros had effectively cut off the Democrats' soft-money supply and diverted it to the coffers of an alternative network of beneficiaries―which he personally controlled. As political analyst Byron York observed: “[T]he new campaign finance rules had actually increased the influence of big money in politics. By giving directly to 'independent' groups rather than to the party itself, big-ticket donors could influence campaign strategy and tactics more directly than they ever had previously.... And the power was concentrated in very few hands”―most notably Soros's.

While Soros's 527s were clearly devoted to Democratic Party agendas and values, they publicly professed to be independent of any party affiliations. Their partisanship was somewhat shrouded in proverbial shadows. Gradually, a number of journalists began to make reference to the emergence of certain pro-Democrat “shadow organizations” that seemed geared toward circumventing McCain-Feingold's soft-money ban. In time, the term “Shadow Party” came into use.

For an in-depth look at the Shadow Party, click here. 

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