James Kuhnhenn
Knight Ridder Newspapers
Dec. 14, 2003 12:00 AM

WASHINGTON - At the end of their sweeping 131-page opinion upholding restrictions on big-money political donations, Supreme Court justices conceded something every politician always knew: "Money, like water, will always find an outlet."

It already has.

During the year the McCain-Feingold campaign-finance law has been in effect, money has flowed to a growing number of ideological and special-interest groups outside the law's reach. Political parties, banned from accepting so-called "soft" money (contributions not in support of a specific candidate), are financially weaker. And there has been an eruption of innovative fund-raising and influence-seeking techniques.

Nowhere is the new landscape more evident than in the current presidential race. Three candidates, led by President Bush, have decided to forgo public campaign financing and spending limits through the primary-election season. And most candidates, particularly Howard Dean, have elevated the role of the Internet as a fund-raising tool, using it to tap people previously unengaged in politics.

"Howard Dean has showed that it's possible to raise significant sums of money, hundreds of millions of dollars, probably, over time, from small donors," said Rep. Robert Matsui, D-Calif., chairman of the Democratic Congressional Campaign Committee. "What we really are going to have to do is to focus on the small dollars."

Both Republican- and Democrat-leaning organizations have emerged to promote candidates and educate voters, replacing the political parties as both the organizers of politics and the reservoirs of unlimited contributions.

"What we're seeing is a predictable diversion of money and political power," said Republican election lawyer Jan Baran. "Political parties have been significantly defunded and have less resources to finance their activities. This is a more secure world for billionaires and groups who have rights under this law that political parties do not."

That's one view of the new political world order.

But Tom Mann, a political scientist whose views on campaign financing are sprinkled throughout the Supreme Court decision, believes that "potentially harmful effects on political parties today are unlikely to be realized." Mann is a senior fellow at the Brookings Institution, a liberal think tank that is very influential in Washington's establishment circles.

Whether the parties are harmed or not, however, the world has already changed significantly for politicians and the industry of political strategists, media consultants and fund-raisers.

For example, the campaign-finance law restricts how independent groups pay for political ads in the weeks before an election. Under its ad limits, groups such as the Sierra Club and the National Rifle Association can run ads about specific candidates within 60 days of a general election only if the ads were paid for with money from donors whose identities have been disclosed to the Federal Election Commission.

The NRA plans to sidestep that prohibition by airing general-issue ads and then directing viewers to more specific political commentary on the Internet, which isn't regulated by the new law. The NRA's Wayne LaPierre said he also is looking to buy a television or radio station that would give the NRA greater freedom to endorse or criticize politicians.

"That's great, that's creative, they're learning something," said Kenneth Goldstein, a professor at the University of Wisconsin-Madison, whose research into political advertising earned him a mention in the Supreme Court's majority opinion.

Now, with soft money banned, the gap between the parties in fund-raising is evident again. The latest disclosure records, filed at midyear, show that the Republican Party had raised nearly $116 million in regulated "hard money," while Democrats had raised only $44 million.

In the absence of soft money for the political parties, activists from both parties have created groups known as 527 committees, named for the section of the IRS code that regulates them. Essentially, they can raise unlimited amounts of money from contributors whose names don't have to be disclosed publicly. The groups can use their funds to register voters, promote a partisan view and advocate on behalf of candidates, as long as they don't run political ads within 60 days of a general election or 30 days before a primary.

Democrats have been quicker out of the blocks, working with groups such as MoveOn.org and America Coming Together. One of their top benefactors is billionaire George Soros, who has pledged $10 million to ACT and $2.5 million to MoveOn.

"The money is already there in vast quantities through surrogate activity. My concern is that the cynicism will be just back," said Kenneth Starr, the lawyer who argued the case for critics of the law before the Supreme Court. "The court recognized that. The court foresaw it. They read the newspapers. They know what George Soros is doing."