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River of soft money will simply find new channels

Mal Warwick could be called the grandfather of direct mail political fundraising.

In 1970, Warwick installed an early model computer in his kitchen in Berkley, Calif., and used it to generate fundraising letters on behalf of black activist Ron Dellums. His success exceeded their wildest dreams; Warwick raised a total of $6-million for Dellums during his 27 years in Congress.

But it does not necessarily take a visionary like Warwick to see that a new day is dawning for his industry _ a financial windfall created by the campaign finance legislation that passed the Senate last week.

"I am quite certain that many direct mail people are salivating at the prospects of new business owing to the campaign finance bill," Warwick said in an interview.

The centerpiece of the legislation, effective after the next election, is a provision that bans unrestricted soft money donations to candidates, which totaled more than $500-million in the last election.

This money is not expected to dry up, however. Most experts predict that while these dollars must be rerouted, they will continue to be spent to influence political elections.

The political parties also are expected to find loopholes in the legislation, much as they did with the existing law enacted in the post-Watergate era of the mid 1970s.

The parties and the candidates will rely more heavily on direct mail because, without the big soft money donations, they need to find more people to make so-called "hard money" donations of up to $2,000 a year.

Although direct mail helps politicians to reach small donors, it also has some drawbacks.

Even though some well-established direct mail programs can collect up to 10 times more money than they spend on the mailings, says Warwick, the initial mailings usually yield a return of no more than 3 percent. In addition, he says, the candidates whose fundraising letters get the biggest return are those with extreme views, either left or right.

"It's very difficult for middle-of-the-road candidates to distinguish themselves on the issues," said Warwick. "So direct mail fundraising might mitigate against political compromise."

The Republican Party has an undisputed advantage over Democrats when it comes to direct mail fundraising. Warwick notes the GOP began building its donor mailing list in the early 1970s; the Democratic Party did not get started until the 1980s.

"Republicans are still way ahead," Warwick said. "The economics of direct mail has changed. It's now more costly to do donor acquisition (initial mailings that sort out donors and non-donors). The political parties have more competition in the direct mail field from charities and other nonprofits. The Democrats just got started 10 years too late."

Newspapers also are expected to benefit from the new legislation. The bill bans special interests from airing commercials on television or radio that mention a candidate's name in the two-month period prior to the election. But because there is no restriction on print ads, these groups are expected to redirect their advertising dollars into the coffers of the local newspapers _ at least during the final days of a campaign.

In fact, Sen. Mitch McConnell, R-Ky., criticized many newspapers for editorializing in favor of the campaign finance legislation without also disclosing their financial interest in the bill. He failed to mention, however, that many newspapers supported the legislation long before it contained that provision.

Despite the new restrictions on broadcast advertising, more money is certain to flow into special interest advertising campaigns, which both reformers and politicians see as a negative development. These campaigns are often the work of front groups with bland, upbeat names such as "Citizens for Business Success" that disguise the real source of their money.

Bundling _ a very popular practice in the early 1990s _ is likely to see a resurgence too, says former Federal Election Commission general counsel Larry Noble.

A "bundler" is an influential person, usually a top business executive, who can persuade his friends or employees to give him checks made out to the candidate. He then hands them to the candidate in a single bundle. This way he can gain extra influence with the candidate, even though he does not violate the $95,000 a year limit on personal contributions.

Noble predicts politicians will find new loopholes in the legislation very quickly. For example, he says the state party organizations, which can still receive soft money donations, will be looking for clever ways to spend it on federal elections.

So even though the campaign finance system needed to be reformed, nobody expects the legislation to eliminate the influence of money in politics.

It is often said there is a similarity between money in politics and runoff from the mountains after a spring thaw. It will find its level, no matter what you do to stop it.