Money in politics
• “Money is the mother’s
milk of politics”
• Jesse Unruh, Speaker of the California Assembly from
1961 to 1968.
•
Money is the root of all
evil.
Overall 2010 expenditures
http://www.opensecrets.org/overview/index.php
Increasing cost of federal elections in
the U.S., 1998-2008
Total cost of federal elections
$6,000,000,000.00
$5,000,000,000.00
$4,000,000,000.00
$3,000,000,000.00
$2,000,000,000.00
$1,000,000,000.00
$1998
2000
2002
2004
Total cost of federal elections
Source: OpenSecrets.org
2006
2008
Costs of campaigning have risen
sharply
$12,000,000
$10,000,000
$8,000,000
$6,000,000
$4,000,000
$2,000,000
$0
1990
House Winner
1992
1994
1996
House Loser
1998
2000
Senate Winner
2002
2004
2006
Senate Loser
Source: Center for Responsive Politics /OpenSecrets.Org
Mean House campaign expenditures,
2008
Source: Campaign Finance Institute analysis of FEC data
The rising cost of winning a seat in
Congress in constant 2008 dollars
Source: Campaign Finance Institute analysis of FEC data
2006 High and low spenders
House
Senate
$1,253,031
$9,635,370
$622,348
$7,406,678
$8,112,752
$40,828,991
Vernon Buchanan (R-FL)
Hillary Clinton (D-NY)
Least expensive winning
campaign
$182,375
$1,529,370
Least expensive winning
campaigner
Wayne T. Gilchrest (R-MD)
Craig Thomas (R-WY)
Most receipts from PACs
$2,437,580
$5,433,898
Candidate with most PAC
receipts
Deborah Pryce (R-OH)
James M. Talent (R-MO)
Average winner spent
Average loser spent
Most expensive campaign
Most expensive
campaigner
Source: Center for Responsive Politics/OpenSecrets.Org
• The cost of the 2010 election
– OpenSecrets.org
– In Kentucky
2008 Presidential
• http://www.opensecrets.org/pres08/index.ph
p
2010 congressional races
• http://www.opensecrets.org/overview/index.
php
The effect of money
• The biggest spenders don’t necessarily win
– Billionaires that have spent huge sums have often
failed to gain much support
• Most officials are at least fairly well to do and
few are poor
The dilemma
• To carry out an effective campaign for
regional, statewide or national office, you
need money—and lots of it
• You only have a few ways of getting it
– Spend your own
– Get it from the government
– Get it from your political party
– Get individuals to provide it
– Get groups or organizations to provide it
However, each source presents a
problem
• Spending your own is financially painful to you
– For society, if all candidates must fund
themselves, we could quickly get to where only
the rich can compete
• http://www.opensecrets.org/MT/mtsearch.cgi?search=self+finance&IncludeBlogs=8
– Good candidates will not run because it is too
expensive
What is public funding?
• Public funding of Presidential elections means
that qualified Presidential candidates receive
federal government funds to pay for the valid
expenses of their political campaigns in both
the primary and general elections. National
political parties also receive federal money for
their national nominating conventions.
– FEC
Primary matching funds
• Partial public funding is available to
Presidential primary candidates in the form of
matching payments. The federal government
will match up to $250 of an individual's total
contributions to an eligible candidate.
Candidates must qualify
• Only candidates seeking nomination by a
political party to the office of President are
eligible to receive primary matching funds.
• He or she must raise in excess of $5,000 in
each of at least 20 states (i.e., over $100,000).
– a maximum of $250 per individual applies toward
the $5,000 threshold in each state.
• Candidates also must agree to:
• Limit campaign spending for all primary elections
to $10 million plus a cost-of-living adjustment
(COLA).
• Limit campaign spending in each state to
$200,000 plus COLA, or to a specified amount
based on the number of voting age individuals in
the state (plus COLA), whichever is greater.
• Limit spending from personal funds to $50,000.
Impact:
• More candidates can enter the primary
election with a meaningful presence
• But: the limits are low enough that many
major candidates opt out of the public finance
system in the primaries
• Getting it from the government
– Tax checkoff/public funding
– Instituted in 1976 for presidential contests
• However, expanding it to all contests leads to
tremendous increase in costs
• Several states have instituted some form of public
financing for their statewide offices
• People cannot direct the money to candidates
they really like—just to parties
• Extremely unfair to minor
parties/independents
• Limits set on funds from other sources
candidates are allowed
Public financing
• Major parties receive money for their nominating
conventions
– Probably the most controversial of all public financing
• Still, the great majority of convention money comes from
PACs, lobbyists
• General election funds come in lump sum (all
candidate is allowed to spend) if accepted
– However, money flows to non-candidate committees
and is used in ways that support candidacy
Source: Public
Citizen from FEC
data
Individual donations
• Seeking support from people who want to see
your views expressed in government
– Like-minded individuals willing to support your
campaign because they believe in you
• The downside, though, is that those with a lot
of money are in a much better position to do
this
– Instead of running themselves, rich people can
generate “the best government money can buy”
• The Obama campaign was known for having
generated much of its funding through small
donations--$200 or less
– However, when we look at the overall numbers,
large donors continue to be the most significant
source of funds
Small donors v large donors
Source: Campaign Finance Institute
Presidential contributions 2008
• http://www.fec.gov/DisclosureSearch/mapAp
p.do?cand_id=P80002801&searchType=&sear
chSQLType=&searchKeyword=
Kentucky District 6
• http://www.fec.gov/DisclosureSearch/HSRefre
shCandList.do?category=disH&stateName=KY
&congressId=06&election_yr=2010
The need for money explodes
• The 1968 presidential election vastly
increased the cost of presidential campaigns
– Selling of the President
– Senatorial campaigns would gradually follow suit
• Then House
• Demand for money for television commercials
drive up the need for donations
1972 Federal Election Campaign Act
• At the end of Nixon’s first term, the Federal
Election Campaign Act was passed by
Congress
– Nixon reluctantly signed
• Watergate
– 1974 Federal Election Campaign Act Amendments
• FECA with amendments was the most
sweeping campaign finance reform in history
– But before the ink was dry, campaign managers
were looking for loopholes
• The law was pretty much immediately
challenged in the courts
• Eventually, Buckley v. Valeo, decided by the
Supreme Court, would limit FECA considerably
Campaign Finance Reform and Buckley II
Original Provision
Effect of Buckley v. Valeo
Contribution limits
Individual limits: $1k/candidate/election
Affirmed
PAC limits: $5k/candidate/election
Affirmed
Party committee limits: $5k/candidate/election
Affirmed
Cap on total contributions individual can make to Struck down (freedom of
all candidates ($25k)
speech)
Cap on spending “on behalf of candidates” by
parties
www.mit.edu/~17.251/finance.ppt
Affirmed
Campaign Finance Reform and Buckley I
Original Provision
Effect of Buckley v. Valeo
Expenditure limits
Overall spending limits (Congress and
president)
Struck down partially
(freedom of speech)
Limits on the use of candidates’ own resources
Struck down entirely
(freedom of speech)
Limits on media expenditures
Struck down entirely
(freedom of speech)
Independent expenditure limits
Struck down entirely
(freedom of speech)
www.mit.edu/~17.251/finance.ppt
Subsequent changes
• Congress amended FECA to try to deal with
Buckley v. Valeo
– 1976 Changes in limits (higher for PACs than
individuals)
– Led to explosion of PACs and PAC money
– 1979 reduction in paperwork burden
Federal Election Commission
• Purpose
– In 1975, Congress created the Federal Election Commission
(FEC) to administer and enforce the Federal Election
Campaign Act (FECA)
• the statute that governs the financing of federal elections.
– The duties of the FEC, which is an independent regulatory
agency, are to
• disclose campaign finance information
• enforce the provisions of the law such as the limits and
prohibitions on contributions,
• oversee the public funding of Presidential elections.
• 1978 FEC rules that FECA allowed for money to
be used in grassroots organizing, voter
registration, GOTV, without regard to limitations
on contributions
• PAC growth
– 1974—1,146 PACs
– 1986—4,157 PACs
• Congress applied ruling to parties
• Contributions for these activities came to be
known as “soft money”
• How was it exploited?
– Candidate campaign raises money for party
committee, then party committee spends it on
activities that support the candidate
Federal Election Commission
• Purpose
– In 1975, Congress created the Federal Election Commission
(FEC) to administer and enforce the Federal Election
Campaign Act (FECA)
• the statute that governs the financing of federal elections.
– The duties of the FEC, which is an independent regulatory
agency, are to
• disclose campaign finance information
• enforce the provisions of the law such as the limits and
prohibitions on contributions,
• oversee the public funding of Presidential elections.
• Bundling, used extremely effectively by
George W. Bush’s campaign
– Person soliciting and bundling donations gains
clout
• Individuals often don’t like their name being
tied to a campaign donation
– Especially if the candidate is controversial or
sleazy
George W. Bush’s innovation
• Bundling
– Large donors tap their friends for maximum
individual donations then give in a ‘bundle’ to the
candidate committee
• $500K bundles used to support Bush’s primary
campaign
– $100K plus “Pioneers”
• Primary funding total $95.5 million
– Took federal dollars for general election
Bundling
• While there are disclosure requirements for
bundling, they only go into effect when a
bundler personally hands over checks. Most
campaigns get around the disclosure provision
by not having the bundler ever touch the
checks.
Bundling
Source: Campaign Finance Institute
PACs
• Massive growth since the development of
campaign finance reform
• The growth of PACs has reduced the role of
political parties significantly
– However, we may be seeing a reversal of the trend
Political Action Committees (PACs)
• PACs are organizations set up to provide
money to candidates for public office that is
neither contributed directly to the candidate
nor to a political party
• In U.S. politics, an organization whose purpose is to
raise and distribute campaign funds to candidates
seeking political office. PACs rose to prominence after
the Federal Election Campaign Act (1971) limited the
amount of money any corporation, union, or private
individual could give to a candidate. PACs were able to
circumvent these limits by soliciting smaller
contributions from a much larger number of
individuals. During the late 20th and early 21st
centuries the vast amounts of money raised by PACs
greatly increased the cost of running for office and led
to efforts to reform this method of financing
campaigns.
PAC contributions to congressional
candidates (in $ millions) [CFI]
Source: Campaign Finance Institute
Top 2010 PACs
• http://www.opensecrets.org/pacs/toppacs.ph
p
Political parties
• The goal of political parties is to promote
party members to positions of power and to
forward their issue agenda
– Money is allocated according to the likelihood of
advancing those goals
• Parties solicit contributions, engage in
campaigning and provide support for party
members
Political parties
• A number of rules about party fundraising and
spending exist
– However, as with many of the rules, court
decisions are questioning restrictions
Soft money v. hard money
• Hard money more closely controlled
– Donated directly to candidate for electioneering
– Donated to political party for candidate support,
etc.
– Donated to PACs for electioneering
• Soft money used to engage in issue
campaigning, etc.
– Cannot use ‘magic words’ “vote for xxxx”
Hard Money Fundraising
Source: Campaign Finance Institute
Soft money explosion
• Limits on hard money contributed to an
explosion of soft money in 2000
Soft money
Bipartisan Campaign Reform Act
(McCain-Feingold 2002)
• Meant to close loopholes that allowed soft
money to flow into campaign committees and
to control advertising said to be aimed at
issues but actually performing as campaign
promotion
BCRA
Eliminated all soft money contributions to national party
committees
Increased individual limit from $1,000 to $2,000 with index for
inflation ($2,300 in 2008)
Banned the use of certain political communications by
corporate, union or incorporated non-profit committees within
30 days of primary or convention, or 60 days of general (political
communications)
Millionaire’s amendment
“Stand by your ad” (“I’m Bruce Lunsford and I endorsed this
message”)
After soft money
• When political parties were barred from
raising soft money in 2002, fundraising and
spending by independent groups grew rapidly
• PACs
• 527s
• 501(c)(3)s
527s and 501s
• Groups that are not tied to campaigns but engage in
political speech
• United States tax code, 26 U.S.C. § 527
– 527s were the target of McCain-Feingold
• Short decline, but SCOTUS decision may lead to resurgence
– A 527 group is created primarily to influence the nomination,
election, appointment or defeat of candidates for public office.
The term is generally used to refer to political organizations that
are not regulated by the Federal Election Commission or by a
state elections commission, and are not subject to the same
contribution limits as PACs.
– In 2004, the FEC decided that the law did not cover these
independent 527 organizations unless they directly advocated
the election or defeat of a candidate.
• What is a 527?
A 527 is a non-profit organization formed under
Section 527 of the Internal Revenue Code, which
grants tax-exempt status to political committees
at the national, state and local level. Over the
past several years, the term has come to refer to
a new form of political organization operating in a
gray area of the law. These groups actively
influence elections and policy debates at all levels
of government, but do not advocate explicitly for
election or defeat of candidates.
– Center for Public Integrity
• How were 527s created?
These groups are the result of a loophole which was
opened more than 25 years ago when the IRS
broadened its definition of the types of groups eligible
for tax-exempt, non-profit status as political
committees. That new definition was more expansive
than the FEC's definition; and it allowed these groups
to gain political committee status under tax law, while
avoiding regulation under federal election law.
• Center for Public Integrity
•
•
•
•
Do 527s have financial restrictions?
Financial restrictions on 527s are very few: there are no upper limits on
contributions to these committees, and no spending limits, either. Any type of
donor may contribute, from individuals to unions to corporations, even other nonprofits. There is no specific prohibition on foreign contributions.
Can 527s help federal candidates?
On the federal level, 527s cannot coordinate with or contribute to a federal
candidate in any way. They also may not expressly advocate for the election or
defeat of a specific federal candidate, although 527s are quite free to portray
federal candidates in such a way that there is little doubt as to the message.
Can 527s help state candidates?
At the state level, the rules are different. Section 527 organizations generally can,
and frequently do, give money directly to state and local candidates. In most cases,
however, these groups must abide by state laws, which include registering with
state elections authorities and filing financial reports disclosing the contributions
to state candidates as well as the sources of those contributions. Of course, every
state has different rules that govern committees like this.
Center for Public Integrity
527s
• http://www.opensecrets.org/527s/index.php?
filter2=R
• In 2004, a total of $439,709,105 was spent by
these organizations alone, $307,324,096 of
which was spent by Democratic/liberal groups
and $132,385,009 of which was spent by
Republican/conservative groups.
• http://www.opensecrets.org/527s/
• Examples of 527s include American Solutions for
Winning the Future, EMILY's List, Swift Boat Veterans
for Truth, Texans for Truth, The Media Fund, America
Coming Together, the Progress for America Voter Fund,
Secretary of State Project, United American
Technologies, American Right To Life Action and the
November Fund. MoveOn.org was previously a 527,
until they decided to shut down their 527 group as a
result of "new politics offered by Barack Obama".[1]
• Federal Election Commission rulings after the 2004
election put advertisements which questioned a
candidate’s character and fitness for office off limits to
527s specifically.[2]
2004 Election controversy
• On May 5, 2004, the Republican National
Committee accused MoveOn.org, The Media
Fund, America Coming Together and America
Votes of coordinating their efforts with the
John Kerry campaign.
• On August 20, 2004, John Kerry's campaign
accused Swift Boat Veterans for Truth of
coordinating their efforts with the George W.
Bush campaign.
• In 2006 and 2007 the FEC fined a number of
organizations, including MoveOn and Swift
Boat Veterans for Truth, for violations arising
from the 2004 campaign. The FEC's rationale
was that these groups had specifically
advocated the election or defeat of
candidates, thus making them subject to
federal regulation and its limits on
contributions to the organizations.
501(c)(3)
• Charitable Organizations
• All 501(c)(3) organizations are permitted to
educate individuals about issues, or fund
research that supports their political position
without overtly advocating for a position on a
specific bill. They are not supposed to directly
promote a candidate or engage in electoral
activities. However, recent actions that come
close have been accepted by the SCOTUS.
• http://www.publicintegrity.org/news/entry/25
09/
Independent expenditures
• Individuals or organizations can make
independent expenditures as long as they
were independent of a candidate or official
campaign committee.
– NRA
– MoveOn.Org
– Willie Horton
– Swift Boat Veterans
Issue advocacy
• Committees paid for ads professing to push or
oppose issues associated with a candidate
without expressly calling for people to vote for
or against that candidate
• Source: Center for Public Integrity
– SCOTUS’ “magic words”
• Vote for XXXX
• Vote against XXXX
Corporate and union money
• Corporations have traditionally contributed
much more than unions to candidates
• Recent Citizens United case has been
interpreted to allow unlimited corporate
spending
The current money climate
• Citizens United v. FEC
– Removed limits on corporate/union spending
• Republicans prevented new requirements for
disclosure from coming to a vote in Congress
• New levels of corporate spending in 2010
Contribution limits
• http://en.wikipedia.org/wiki/Campaign_financ
e_in_the_United_States
http://elections.nytimes.com/2008/president/campaign-finance/map.html
http://www.usatoday.com/news/politics/election2008/campaign-financetracker.htm
Citizens United v. FEC
• http://www.pbs.org/newshour/extra/video/bl
og/2010/01/high_court_overturns_limits_on.
html
• http://www.pbs.org/wnet/need-toknow/video/as-election-season-beginsspending-on-campaigns-breaks-records/3319/