WASHINGTON — The Federal Election Commission stepped aside Thursday from regulating the unlimited contributions that have been flowing into the 2004 presidential race from the Democratic side, setting the stage for an outpouring of money from Republican donors who have mostly remained on the sidelines.
In a closely watched decision, the FEC voted not to restrict the so-called 527 groups that have been spending unlimited money aimed at helping presumed Democratic nominee John F. Kerry. The commissioners said they needed more time to review their options.
FEC Commissioner Michael Toner, a Republican who had urged his colleagues to take action, said he was disappointed and predicted the competition for dollars would grow even more feverish in a year when fundraising records are already being routinely shattered.
"We're going to see a dramatic escalation of spending by 527 organizations on both sides of the aisle. It's inevitable," Toner said. "The 2004 election is going to be the Wild West."
Two years after passage of the McCain-Feingold law intended to stem the flow of big money into national elections, the presidential race is likely to become a financial free-for-all now that the government has indicated that it will not stop the independent groups that have discovered a way to avoid regulation of large contributions, political observers say.
The Bush campaign, Republicans and some FEC commissioners had argued that nonparty groups should be regulated under the same rules that now prohibit "soft money" -- unlimited corporate, union and individual contributions -- from being spent in the presidential and congressional elections. The McCain-Feingold law broadly banned the use of soft money by political parties in federal elections.
The 527 groups, named for the section of the Internal Revenue Service code that they are registered under, have argued that the soft-money ban does not apply to them.
The election commission's 6-0 decision to postpone action for three months ostensibly means Democratic-leaning groups such as the Media Fund, America Coming Together and MoveOn.org Voter Fund can continue spending tens of millions of dollars on advertising and political activities opposing President Bush.
FEC commissioners made clear Thursday that even if they take action later this year to rein in the groups, new rules would have no bearing on the November election.
Within minutes of the vote, conservative advocacy group Progress for America urged other Republican-leaning nonprofits to "accelerate their efforts to counter the liberals' activities." Group president Brian McCabe said the FEC decision gave them "jet fuel to take off from here."
Grover Norquist, president of Americans for Tax Reform, another conservative nonprofit, vowed Thursday to "match the other folks dollar for dollar."
Republican National Committee Chairman Ed Gillespie and Bush campaign chairman Marc Racicot issued a statement calling the agency's decision to postpone action "irresponsible." They said that the ruling "sets the stage for a total meltdown of federal campaign finance regulation in 2004."
"Thanks to the deliberate inaction by the Federal Election Commission, the battle of the 527s is likely to escalate to a full-scale, two-sided war," the Republican leaders said.
Liberal 527 groups have already spent more than $24 million on advertisements critical of President Bush, and other money on get-out-the-vote registration drives in contested states. Much of their money has come from unions and wealthy individuals, among them Hollywood producer Steven Bing, who has donated $8 million, and philanthropist George Soros, who has contributed $7.8 million.
The RNC and the Bush campaign filed a complaint with the FEC in March, alleging that Democratic-leaning 527s were breaking the law by raising and spending soft money and illegally coordinating their activities with Kerry's presidential campaign.
The agency received nearly 200,000 comments on its proposed rules -- many from nonprofit groups that said possible restrictions on their fundraising would be an infringement on free speech. The FEC also heard from more than 100 members of Congress, who differed about what, if anything, the agency should do.
Toner, along with Democratic Commissioner Scott Thomas, endorsed a scaled-back proposal to impose fundraising and spending limits on the 527s, but they could not muster any votes from their colleagues to pass it. Four votes are necessary for the FEC to take action.
The six-member panel has three Republicans and three Democrats. But the FEC debate about campaign spending by independent groups did not split along party lines.
Thomas said Thursday that the 527s were circumventing existing laws by using soft money to influence the federal election. "It just seems to me if it's a really big serious problem, we should act," he said. "It's our job."
