The New Money Game

By Romesh Ratnesar

Not so long ago, re-election looked like a breeze for New Jersey Representative Frank Pallone. A six-term Congressman in a district that tilts Democratic, he won his last two races handily with more than 60% of the vote. But this month an outfit called Americans for Job Security--in reality a front group led by large insurance companies furious with Pallone for heading the charge for managed-care reform--unveiled an anti-Pallone "issue ad": the TV spot blasts Pallone's positions without explicitly advocating his defeat. Among other things, it accuses him of voting to raid the Social Security trust fund to pay for welfare. "Call Congressman Pallone," the announcer says, over a video of disreputable card sharks, "and tell him to...stop gambling with our futures." Pallone says the ad is false, but now he'll have to defend himself until Election Day. Americans for Job Security plans to spend $2 million to take him down.

Issue ads like these are flying under the radar of campaign-finance laws and into the living rooms of voters this election season. They came into vogue in 1996, when the AFL-CIO unleashed $20 million for ads targeting various members of Congress, and business groups retaliated. This year there's more money than ever going into making these ads, and more meanness being sunk into them.

Because the courts have ruled that issue ads are merely political opinions expressed by individuals or groups, rather than electioneering spots for a specific candidate, they are next to impossible to regulate. So interest groups and party affiliates--unlike the candidates themselves--don't have to disclose how much money they spend on advertising (or, in the case of independent groups, where the money comes from). This year more than 70 organizations have dumped at least $260 million into political issue ads, according to the Annenberg Public Policy Center. Many have appeared for the sole purpose of knocking off vulnerable candidates or just plain ideological enemies, much to the annoyance of campaign-finance crusaders. Grumbles reform advocate Fred Wertheimer: "It is one of the greatest fictions in American political history that these are [considered] issue ads as opposed to ads for the clear purpose of influencing federal elections."

While some prominent groups like the AFL-CIO are husbanding their resources this year for voter-mobilization drives, the political parties are getting in on the issue-ad bonanza. It's a doozy for Republicans. The National Republican Congressional Committee, which funds House races, figures to spend $28 million on issue ads in more than 30 states, a blitz dubbed Operation Breakout. That compares with $13 million in 1996. Democrats will spend $7 million, up $1 million from two years ago. The G.O.P. is expected to lay out $10 million on Senate races before the campaign is over. "The anticipation is excruciating--just thinking they're going to drop all this money in the last week, too late for us to respond," says a Democratic strategist.

Republican issue advertising has already played a major role in several tight contests. In South Carolina, incumbent Senator Ernest Hollings has spent twice as much as G.O.P. challenger Bob Inglis since Labor Day, but Inglis has made up the gap through $725,000 in ads paid for by the state G.O.P. In Wisconsin's Senate race, squeaky-clean Democrat Russ Feingold refused to accept any party advertising on his behalf, but his challenger, Republican Mark Neumann, didn't make the same promise. Thanks to a three-month barrage of scathing anti-Feingold spots--none of which, of course, directly instruct viewers to vote against him--Neumann has closed a 27-point gap to zip.

There's good reason why the parties are busting through the issue-ad loophole. Campaigns are increasingly fought on television, not on the streets, and the cost of air space limits what candidates can put out on their own. And issue ads have advantages over spots that just say, "Vote for our guy." That kind of explicit shilling is subject to spending caps and can be paid for only with "hard" money--small contributions from individuals and political-action committees. An issue ad, though, can be funded in part with soft money, which parties can collect in any amount from virtually any source. The Republican National Committee and Ohio's Democratic Party are fighting in court for the right to pay for issue ads entirely with soft money.

Issue ads allow parties to do some of the candidates' dirty work. In Kentucky's barn-burning Senate race, the G.O.P. has poured close to $3 million into issue ads benefiting its candidate, Representative Jim Bunning. One ad engages in race baiting while hammering Bunning's opponent for voting for the North American Free Trade Agreement. "Tell Scotty Baesler, on foreign trade deals, start voting for Kentucky workers," the narrator says, "but if you live in Mexico you might want to tell him"--cut to a sloppily dressed, brown-skinned man--"Muchas gracias, Senor Baesler." The Republican pooh-bahs liked the ad so much that last week they rolled out another one, which hews to the same script but throws in a worker with Asian features who thanks Baesler in Chinese.

Some candidates have attested to a touch of discomfort with ads that convey misleading or offensive messages. But they are probably protesting too much. Issue ads serve to mercilessly savage an opponent's record and force sputtering denials. Yet if the spots come under fire for being too vicious, candidates can still say it wasn't their idea. What's not to like?

Plenty, for people concerned with the perniciousness of money in politics and the superficial, image-driven nature of campaigning. But there aren't too many of those folks in Congress these days. Campaign-reform efforts to regulate issue ads have foundered in Congress or have been blocked by the courts. And though labor and business groups spent most of their money this year on voter turnout, they are already gearing up their advertising onslaughts for the 2000 presidential campaign. Now that the parties, too, have made issue advertising their campaign weapon of the future, it appears likely that the rest of us will be forced to see politics turned into a permanent, electronic spitting contest.

--Reported by Michael Duffy and Viveca Novak/Washington

With reporting by Michael Duffy and Viveca Novak/Washington