The Rebel's Revenge

By John Dickerson and Viveca Novak

With all the high-flown speechifying coming out of Congress last week, you would have thought the July 4th re-enactments had started early. "We struck a blow for freedom today," said G.O.P. Congressman Lindsey Graham. On the Senate floor, John McCain gave a similar fife-and-drum salute: "It is indeed a great day for democracy." The defeated foe: a proliferating breed of shadowy tax-exempt special-interest groups that must now disclose their political spending and donors. The patriot among patriots? McCain, who led the charge for the first successful effort to change campaign-finance laws in more than two decades.

The defeated groups began to multiply only a few years ago, when some clever lawyers realized that section 527 of the Internal Revenue code was a great device for setting up organizations that didn't have to disclose anything as long as they didn't expressly tell voters to support or oppose a candidate. For example, a group called Citizens for Better Medicare, which spent about $30 million on ads opposing Bill Clinton's proposal for extending Medicare to cover prescription drugs, is funded by pharmaceutical companies but won't say which ones. House majority whip Tom DeLay, the loudest congressional opponent of shining a light on 527 groups, is tied to a more opaque one called the Republican Majority Issues Coalition, which has vowed to spend up to $25 million supporting the G.O.P. in the upcoming election--but won't say where the dough is being raised or exactly how it will be spent.

Almost all participants agreed that no matter how small the reform, it wouldn't have happened without McCain. "He is the Michael Jordan of campaign-finance reform," gushed Delaware's Republican Congressman Mike Castle. Not only did McCain work both branches of Congress, but his effort demonstrated that the millions of primary votes he won during his failed presidential bid have turned up the political heat for reform.

You could call it McCain's revenge. During the primaries last winter, he was hit by a $2.5 million ad attack by a group called Republicans for Clean Air; two Dallas tycoons and big Bush supporters eventually confessed to the stealth attack. So it should have been a surprise to nobody--though it was to the Senate leadership--three weeks ago when McCain forced a vote to attach the disclosure provision to a defense bill. It passed 57-42, with the help of a handful G.O.P. Senators who had voted against previous reform attempts. "You know what those Senators had in common?" asks McCain. "They're all up for re-election."

In the House, G.O.P. leaders hoped to split the bipartisan coalition backing reform by embracing the measure to death. Let's make labor unions and other non- profits disclose, they suggested, knowing that this would peel away Democratic support. Reform proponents countered that corporations should be added as well. The outside lobbying started. Not just unions but also groups like National Right to Life hated the expanded bill. At an impasse on Tuesday, reform backers went to House Speaker Denny Hastert and forced him to scuttle a planned vote on one of the broader versions. Strip it back to just 527s, they said, or we'll slow future House business to a crawl. Hastert backed down.

All along, McCain kneaded the process, talking with Hastert and working the phones right up to the midnight vote. The former candidate has been asked by more than 100 G.O.P. candidates to campaign in their districts. Candidates' internal polls in such states as Michigan, New Hampshire and California show that he is still the most inspiring politician in America. Though McCain has said there's no litmus test for his support, 527s became just that. For the handful of House candidates who have requested the White Tornado for their Rotary Club but voted the wrong way, there may be a problem with the Senator's travel schedule. "So sorry," says a top McCain adviser. "We don't have strings attached, but if you're not even for disclosure, don't call yourself a reformer and don't come knocking on our door for help."

By the time the bill made it back to the Senate, the momentum was too much for Republican leaders. Even longtime reform opponent Mitch McConnell, a Kentucky Republican who voted against the bill, encouraged anyone up for re-election to back it. "I do not think this is a spear worth falling on," he said, envisioning Democratic attacks. Once the bill passed, it was zipped over to the Whit House at lightning speed to be signed by Clinton. It takes effect immediately.

Reform advocates say this could be the start of something big. They've come close before. A much broader measure to ban unlimited donations to political parties has passed the House twice and has a majority in the Senate--but not quite enough votes to overcome G.O.P. filibustering. The growing good-government gang hopes it's got the momentum. But opponents too are hopeful. This vote may have taken care of their campaign-finance obligations for a while. Even Castle agreed. "It'll make that next step a little more difficult, because members will be able to say we already did something."

Nevertheless, much of the campaign-ad subterfuge will continue. Even those who led the fight for the bill concede that the targeted 527 groups will simply reorganize in some other guise if they're bent on hiding their sugar daddies. Says election lawyer Kenneth Gross: "It doesn't mean a whole lot. It'll affect the process only at the margins."

As both sides of the issue return next week from their July 4th recess, they are re-loading their muskets. Reformers plan to gather Monday to pick which issue on their long list will drive their next ambush. DeLay has vowed to keep fighting just as hard to support groups like the Republican Majority Issues Coalition. "They're not going to intimidate me," said the outspoken whip. So, despite all the celebration, no one is calling for fireworks just yet. Unless they're for battle.