INSIDE WASHINGTON: Election regulators strained

Born in the political rubble of the Watergate scandal, the nation's 34-year experiment with limiting the influence of big money in federal elections is being tested as never before.

The agency that enforces the laws governing political money is gridlocked by ideological differences. Courts have eaten away parts of the law, ruling them at odds with constitutional guarantees of free speech. And President Barack Obama, who made campaign promises to step up the Federal Election Commission's enforcement, is in no position to deliver on that pledge amid higher-priority policy battles over the economy, health care and the environment.

Campaign finance rules are teetering between a major makeover and irrelevance.

Here's how it's supposed to work: The Federal Election Commission's role is to enforce laws spelling out who can contribute money to presidential and congressional campaigns, how much they can give and how the contributions are publicly disclosed. The disclosure part has worked relatively well over the years, but the agency's enforcement mission has been carried out only sporadically.

Now, the ideological fight is over whether government can even try to prevent corporations and unions from spending millions on politics. Enforcement foes ask, if a wealthy individual, protected by free speech rights, is willing to support an ad campaign, why can't big business or labor? The Supreme Court will hear arguments on that next month.

"There is new uncertainty in areas of the law," particularly those involving spending to influence elections that is carried out by independent outside groups, says Republican FEC member Donald McGahn.

"The opportunity to spend money without being regulated seems to me to be greater than ever before," says Scott Thomas, a former Democratic commissioner who now advises private clients about how to follow campaign finance laws. "For folks who have corporate or union resources to spend on politics, it's potentially a new day."

In the short term, it means election lawyers are hard pressed to advise their corporate, union and political clients on what the rules will be for next year's midterm congressional elections. "There's great fluidity and uncertainty about what restrictions are going to exist," says Michael Toner, a former Republican FEC commissioner now in private practice.

In the longer term, it means that the intersection of money and politics may be in for a major shake-up. Among the factors driving the current crisis:

-Five of the commission's six current members - including all three Republicans - were appointed a year ago, after a period in which the agency was unable to act because of vacancies. Those three Republicans have since largely voted as a bloc, objecting to enforcement actions that in some cases were authorized by their GOP predecessors. The result: The most controversial issues the FEC deals with have gone unresolved, since it takes four votes for the commission to take action.

In one example, the agency's staff negotiated a fine against the November Fund, a group largely funded by the U.S. Chamber of Commerce, which had aired ads attacking Democratic vice presidential candidate John Edwards in the 2004 campaign. The commission's GOP members rejected the settlement, prompting a complaint from two Democratic commissioners that it amounted to "a refusal to enforce the law."

Advocates of stronger FEC enforcement blame McGahn, whose term on the commission expired in May but who can serve until a replacement is named. They charge that McGahn, a former lawyer for the Republican Party's House campaign committee and for former House Majority Leader Tom DeLay, is setting the hands-off agenda for the commission's GOP bloc.

"The message being sent is that the campaign finance laws are not going to be enforced in the 2010 elections, and you've got a disaster on your hands," says Fred Wertheimer, head of the watchdog group Democracy 21.

McGahn says he's only returning the agency to its basic mission, balancing free-speech rights with the need to prevent corruption, or its appearance.

"It is absolutely true that there is less enforcement activity," says Democratic commissioner Ellen Weintraub, still serving two years after her term expired. But that will be hard to change, she adds: "The problem is we're never going to be anybody's top priority."

-Congress only grudgingly instituted the current regulatory scheme in 1975, part of an effort to exorcise the taint of Watergate, and it never has been enthusiastic about the regulator it created. Senate Majority Leader Harry Reid, D-Nev., and Minority Leader Mitch McConnell, R-Ky., have made it clear they're in no hurry to change the current makeup of the commission.

During the 2008 campaign, Obama said "the FEC needs to be strengthened" and that he would seek to do that by replacing current commissioners with people he described as more inclined to strict enforcement. But he's unlikely to pick that fight any time soon with Reid, whose help he needs to pass a health care overhaul and other legislation.

-The Supreme Court will hear arguments Sept. 9 in a case testing whether independent groups can spend their own money to influence elections without coming under regulation as political committees. Court observers say chances are good that the justices will rule that they can, possibly overturning long-standing prohibitions on the use of corporate and labor union funds for politicking.

-The nation's system of public financing of presidential campaigns has fallen into irrelevance after the last two elections and is in need of overhaul if it is to survive as anything other than a handout for also-ran candidates. Obama last year became the first presidential candidate to forgo public financing in the general election campaign, and his fundraising prowess and victory - he spent $315 million while GOP rival John McCain had to subsist on an $84 million government grant - means future top-tier candidates will likely forgo public financing.