A small case of campaign-finance comingling here in Minnesota provides an excellent object lesson as to why the McCain-Feingold reforms do nothing to eliminate checkbook politics. The Star Tribune's Dane Smith reports on a $300,000 personal contribution made by Matt Entenza, the DFL House minority leader, to a 527 that essentially laundered the money:

Faulting both major political parties for an elaborate "shell game," national campaign experts say it may be difficult if not impossible to trace the path of $300,000 that DFL House Minority Leader Matt Entenza contributed to a national "527" organization, which in turn spent generously on campaigns and voter registration in Minnesota.

Minnesota Republican Party officials are trying to build a case that the Entenza donation to the 21st Century Democrats was improperly reported and illegal, and that the money was spent directly on behalf of DFL House candidates in Minnesota through a 21st Century political action committee that paid for field workers.

Entenza and 21st Century officials contend that his contribution was perfectly legal and that not a penny of it flowed to 21st Century field staff on the House campaigns. Rather, they claim, Entenza's money was donated to the Young Voter Project, a separate 21st Century program aimed at turning out students on college campuses and other young voters in several presidential battleground states, including Minnesota.

Here's how the game works. Entenza donated the money in several installments, presumably to keep the total amount from being realized and reported by the press or the state GOP. The money flowed into the general fund of 21st Century, essentially commingling Entenza's money with everyone else's contributions. This so-called "soft money" cannot be used for specific campaigns; it must be used only for party-building activities, such as get-out-the-vote efforts and registration of new voters. 21st Century has these programs, but they also campaigned on behalf of a number of DFL candidates for the Minnesota House. Because Entenza put no earmarks on the contributions, and because 21st Century does not track distribution of specific donations to specific programs, the Minnesota GOP claim that Entenza's donations amounted to a money-laundering operation to get more cash to his House colleagues.

Entenza, of course, denies this and claims that all of his filings were correct and his donations perfectly legal. (He also donated $75,000 to the DFL House caucus fund.) 21st Century also argues that no requirement exists to create separate funds for different efforts; in fact, they note that money is always fungible, and donations without earmarking will always flow to the program most in need of funding, regardless.

Without speculating on any actual wrongdoing, just this description of the black hole that 21st Century represents shows just how sick this "campaign reform" is in operation. Far from preventing checkbook politics, the necessity of allowing 527s to work around soft-money bans creates an entirely new way to launder money in politics, and this smells to high heaven.

In Minnesota, candidates for the House who receive public subsidies cannot spend more than $27,000 on the race. Entenza's money allowed DFL candidates an out to spend an additional $20K on the fifteen swing districts through 21st Century instead of their own campaigns. As the GOP argues, Entenza could have donated that money directly to the caucus -- but then it would have been distributed directly to the candidates, who would still have had to contend with the spending limits or be forced to bust the caps and waive public financing.

If Entenza broke the law, then he should be prosecuted for campaign finance violations; if 21st Century acted criminally, their tax exemption should be revoked. I suspect, however, that what they did was perfectly legal. Cases like this, even on the local level, should convince voters that all John McCain and Russ Feingold created with their "reforms" is another version of organized crime, a shell game as Aron Pilhofer correctly characterizes it.

This system needs to be dismantled, and in its place put full and immediate disclosure and force contributions to go directly to candidates and political parties. That makes the parties and candidates directly responsible for its use, and allows the electorate to immediately determine whose money funds which candidates and causes. Eliminate "soft" and "hard" money distinctions, get rid of tax exemptions for political-action groups altogether, and quit pretending that checkbook politics can be eliminated while adhering to the First Amendment. Otherwise, we will continue to be amazed at the lengths to which people like George Soros and Matt Entenza can go to push their money into the system without a trace of where it went.

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Tracked on November 15, 2005 12:48 PM