Bush's secret stash: why the GOP war chest is even bigger than you think.

• Author: Confessore, Nicholas

Like the natural world, campaign finance is governed by inescapable laws of physics. One is that what goes up usually keeps going up: During every presidential election, the two parties manage to raise more money than they did the last time around. Another is that any given action rarely produces an equal and opposite reaction. Every four years, the GOP outraises and outspends the Democratic Party, usually by tens of millions of dollars.

Until recently, the Democrats could even the scales somewhat by raising "soft" money, the unlimited contributions from rich individuals, corporations, and labor unions that flowed to both parties in roughly equal amounts during the 1990s. But two years ago, the McCain-Feingold Act prohibited parties from raising soft money, a goal long sought by liberal newspaper editorialists and good-government activists. Ever since, the Democratic Party's fundraising has lagged even farther behind the GOP's than usual.

But last summer, a coterie of labor campaign operatives, liberal advocacy-group leaders, and old Clinton hands began exploiting one of McCain-Feingold's loopholes. They organized several groups under Section 527 of the tax code to raise and spend the soft money which the Democratic Party no longer could. Scores of wealthy liberals, among them George Soros, have together given tens of millions of dollars to these "527s," which have generic names like Americans Coming Together and Voices for Working Families. And in March and April, these groups spent a chunk of the money on issue ads attacking Bush, just as Bush was spending $50 million from his campaign war chest to attack Kerry. Though Kerry has raised $85 million worth of the $2,000 and under "hard money" donations permitted under McCain-Feingold--a Herculean amount for a Democrat--Bush has raised more than twice that. Without help from the 527s, the Kerry campaign would probably be in big trouble.

The GOP, of course, is well aware of this. Which is why its lawyers have filed legal challenges with the Federal Election Commission to get the 527s shut down, charging that this "Democratic shadow party" represents a "conspiracy" to "illegally" pump soft money into the presidential race. Such campaign finance groups as Democracy 21, the Campaign Legal Center, and the Alliance for Better Campaigns--which once butted heads with Bush over his opposition to McCain-Feingold--have joined the battle against this new Democratic weapon, as have anti-soft money editorial boards at newspapers across the country. In an editorial titled "Soft Money Slinks Back," The New York Times inveighed against "political insiders" who were "carving a giant loophole" in election law, while the Los Angeles Times called upon the FEC to "issue tough new rules" against the 527s. The Boston Globe was even more acerbic, raging in April that the commission "has all but declared itself impotent to act during this election cycle."

Thus chastened, the FEC last month held two days of hearings on the issue. But a curious thing happened. Instead of coming in for the kill, the GOP's lawyers who were invited to testify refused to appear. Why did they pass up an opportunity to potentially cripple the Kerry campaign, an opportunity for which they had implored the commission for months? Because the FEC had decided that, as long as it was trying to figure out what kind of political activities were legal for 527s, it should also take a look at another category of organizations, known as "501(c)s." Many well-known groups from AARP to the Nature Conservancy--are set up under Section 501(c) of the tax code, and are also allowed to raise and spend donations for political purposes, including running television "issue ads" that mention candidates. And such 501(c)s as the National Rifle Association and the National Right to Life Committee are vital allies of the COP; they raise money mostly from their members and use it to buy ads or direct mail supporting the position of one candidate (usually the Republican) or attacking the position of another (usually the Democrat) on issues important to the group. The GOP lawyers had an obvious interest in not wanting the FEC to do anything that might cripple these groups' ability to help the party.

But they were also eager to protect a whole other category of 501(c)s--one that has garnered little attention from campaign finance reform groups or reporters covering the 2004 election. Like the Democratic 527s, these groups have innocuous-sounding names: Americans for Job Security, for example, and Progress for America. Like the 527s, these groups are staffed by veteran party operatives and, in practice, are wholly or primarily devoted to getting their side's candidates elected. And like the 527s, they may raise and spend unlimited amounts of soft money on radio and television ads, direct mail, and voter contact efforts.

There are, however, a few key differences that make 501(c)s a far more insidious vehicle for soft money. The law does not require that they disclose how much they spend until well after Election Day. Worse, they don't have to disclose who their...