In politics, the rise of small donors

When President Bush signed campaign-finance reform into law after the 2002 elections, the two major political parties held their breath.

Would the new ban on "soft money" - those unregulated, unlimited donations from wealthy individuals, corporations, and organized labor - starve the parties of funds? Many thought the parties would lose control of their messages and voter outreach, as money increasingly flowed to outside groups.

It's true that independent groups are happily taking in millions of soft dollars that the parties can no longer accept, deploying foot soldiers to canvass and register voters, and airing TV ads aimed at influencing opinion. But the parties, too, are flush with cash. They've ramped up their quest for limited "hard money" donations, and been greeted by a flood of cash from individuals. The donor rolls of the two major parties have swelled by 2-1/2 million people.

"Really, the story of this election is in some ways the power of the small donor," says Anthony Corrado, a campaign-finance expert at Colby College in Waterville, Maine. "We have really seen a democratization of the financing of elections in this cycle. When the law was passed, everyone was saying ... 'The parties will wither away and die. The interest groups will rule the world.' Well, if we look through the end of May, national party committees have raised $546 million in hard money."

The presidential race is also awash with money, fueled by individual donations.

By the end of May, President Bush had raised more than $216 million and Democrat John Kerry had raised $147 million; last week alone, Senator Kerry raised $12 million. The Bush campaign has more than a million donors, compared with 345,000 in 2000. In the last election, Democratic nominee Al Gore had 155,000 donors. Last month, the Kerry campaign marked its millionth online donor.

In the first four months of 2004, Democrats posted 35 million pieces of mail to potential donors, more than they did during the entire 1990s, according to Democratic National Committee chairman Terry McAuliffe.

Under the Bipartisan Campaign Reform Act, also known as McCain-Feingold, the limit in hard money was increased: For individual donations to a federal candidate, it is now $2,000, up from $1,000. The limit on individual gifts to a party went from $20,000 to $25,000.

But the new rules don't necessarily explain the burst of giving. It may be as much a matter of passion, with Bush partisans focused on keeping the White House and Congress in Republican hands, and Democrats equally motivated after the close and controversial outcome in 2000.

"You always have increases in small gifts when people feel very strongly in an election," says Larry Sabato, a political scientist at the University of Virginia.

The next question is whether this burst of donating will translate into higher turnout, in an era when voter participation has been drifting steadily downward since 1960. It's possible that those motivated enough to donate are already emotionally invested enough in the process to turn out on Election Day. But it's also possible, analysts say, that getting potential voters into the game now will heighten their motivation come election day.

"Some politicians have said in the past that it's important to get people to contribute, if only a dollar. If that's true, then you should see more of those people turn out to vote," says Larry Noble, executive director of the Center for Responsive Politics. "One of the things to look at is 2006 and 2008. If we increase turnout then, we can draw the conclusion that there has been a direct connection" between expanded donor bases and turnout.

In addition, both the parties and the independent groups have used their resources on voter registration and other get-out-the-vote measures - activities fueled by the influx of funds.

At a briefing Friday by the Center for Responsive Politics, which tracks political donations, campaign-finance experts noted that the old soft-money donors have not fully shifted their giving to the so-called 527 groups - independent activist groups named after the section of the tax code that governs them.

But analysts expect a flood of giving to the 527s during the remaining four months of the campaign, as its intensity picks up. A decision by the Federal Election Commission in May not to regulate 527s could spur creation of many more such groups - particularly by Republicans, who have been slower to form them than have Democrats.

Another element that could encourage donations to 527s is a provision of the Internal Revenue Code that allows donors to remain anonymous. In 2000, an amendment to section 527(j) allowed the groups to withhold donor identity as long as they paid taxes on the money. Some corporate donors had been reluctant to give to 527s because of disclosure requirements. Supporters of McCain-Feingold who believe in more disclosure, not less, are unhappy that 527s are allowed to hide the identity of their donors. The regulation of 527s as campaign groups remains an open question - but one the FEC won't consider until after the 2004 election.