Money in political campaigns

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Money in political campaigns
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• Money is the mothers milk of politics
• Jesse Unruh, Speaker of the California Assembly
  from 1961 to 1968.

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• Money is the root of all evil.

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What are the issues?

• How much can candidates raise?
• How much can various donors contribute?
• What is the relationship between independent
  political speakers and candidate campaigns?
• How much do candidates get from the government to
  campaign, and how do they qualify?

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http//www.opensecrets.org/overview/index.php
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http//elections.nytimes.com/2008/president/campai
gn-finance/map.html http//www.usatoday.com/news/
politics/election2008/campaign-finance-tracker.htm

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Costs of campaigning have risen sharply
Source Center for Responsive Politics
/OpenSecrets.Org
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2006 High and low spenders
House Senate
Average winner spent 1,253,031 9,635,370
Average loser spent 622,348 7,406,678
Most expensive campaign 8,112,752 40,828,991
Most expensive campaigner 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)
Source Center for Responsive Politics/OpenSecrets
.Org
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The effect of money

• The biggest spenders dont 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

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Who raises what?

• Federal candidate comm
• Only federal money
• State candidate comm
• Only state money
• National Parties
• Only federal money
• State/Local parties
• Federal
• Levin
• State
• PACs
• Federal
• State
• 527s
• Neither fed nor state money

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Special Rules for Candidates

• Only federal funds
• Same restrictions on fundraising
• Restrictions on spending
• Millionaires Amendment

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History of money in politics

• Money has been involved in politics as long as
  the United States has existed
• Politics was tied to patronage throughout the
  1800s
• To get a government job you were expected to
  contribute to a candidates campaign funds
• Backing the right horse was important

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Earliest politics

• During the early development of federal politics,
  coalitions formed around favored individuals, and
  around policies. No permanent parties of the
  sort we are used to existed. Campaigns consisted
  of supporters publishing tracts in favor of a
  candidate, holding political gatherings that
  supported him (and often providing liquor in the
  process).

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Popular sovereignty

• As responsibility for nomination of presidential
  candidates gradually moved from congressional
  caucuses for the developing parties to popular
  vote, it became necessary to communicate with the
  wider public. That demanded money.

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How to get the money?

• The first targets in the quest for campaign
  funds were federal government employees, who were
  assessed a percentage of their salaries as a
  condition of continued employment.
• Center for Public Integrity
• Andrew Jackson developed the system, reforming
  the civil service system by rewarding supporters
  with jobs. Bills in Congress to put an end to
  this system were regularly defeated.

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Attempts at reform

• 1867solicitation of funds from workers at Navy
  yards outlawed, and workers protected from being
  fired if they refused to give
• 1877President Rutherford B. Hayes ordered all
  government officials to stay out of political
  activities beyond expressing their views on
  issues and voting
• 1883Pendleton Act provided for selection of some
  federal employees through competitive
  examinations and shielded them from political
  assessments

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Result?

• Political parties, now much more the
  professionalized organizations we know today,
  turned to wealthy donors for money
• Begins in earnest with Ulysses S. Grant
• 1896 Mark Hanna tapped corporate wealth for
  William McKinley (3 million)

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More reform attempts

• 1901 Republican Senator William E. Chandler
  introduced a bill to bar federally chartered
  corporations from contributing to elections at
  any level
• Unsuccessful
• Pitchfork Bill Tillman induced to follow up
• 1907 Tillman Act barred corporate contributions
  to campaigns
• Teddy Roosevelt, criticized for his money
  collection, called for legislation to combat
  bribery, public disclosure of contributions and
  public financing of campaignsbut he was
  unsuccessful

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New levels of money and Supreme Court action

• Henry Ford lost his bid for U.S. Senate from
  Michigan to Truman H. Newberry (R) who had spent
  ten times the federally mandated limit.
• 180,000
• Newberrys case led to a SCOTUS decision that
  Congress had overreached its powers regarding
  primaries

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New Scandals

• Teapot Dome
• One of the oilmen implicated in the scandal had
  made significant contributions to Republican
  Party to pay off their 1920 debt. Because they
  were made after the election, they did not need
  to be disclosed.
• 1925 Federal Corrupt Practices Act
• As much loophole as law
• Spending limits applied only to party committees,
  leading to the development of candidate campaign
  committees, political action committees (PACs)

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Subsequent actions

• Roosevelt New Deal
• Republicans saw this as a massive patronage
  system
• Alben W. Barkley of Kentucky
• Said to have financed his campaign through the
  solicitation of thousands of relief workers
• 1939 Clean Politics Act (Hatch Act)barred the
  solicitation of campaign money from all federal
  employees and specifically from workers on public
  works payrolls
• Later amended to limit individual donations to
  federal candidates (5,000) or national party
  committee and limit to 3 million what any party
  committee operating in two or more states could
  receive or spend

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Limiting the Unions

• War Labor Disputes Act of 1943prohibited labor
  unions from contributing until six months after
  wars end
• Labor Management Relations Act (Taft-Hartley)
  of 1946 made ban on union-treasury money
  permanent
• Spurred the growth of PACs
• Unions formed committees to collect voluntary
  contributions from workers that paid for a wide
  range of political activity (voter education,
  GOTV, registration, etc.)

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• 1943 CIO establishes CIO-PAC
• Raises more than 1.4 million
• After AFL merger, AFL-CIO Committee on Political
  Education
• By 1956, 17 labor PACs contributing 2.1 million
  in federal elections
• 1968 37 labor PACs contribute 7.1 million
• Business got started late
• AMPAC (American Medical Association)
• BIPAC (Business-Industry)

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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 drove
  the need for donations
• 1970Congress passes legislation limiting total
  spending on broadcast ads and requiring
  broadcasters to give lowest rates to
  candidatesNixon vetoes

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1972 Federal Election Campaign Act

• At the end of Nixons first term, the Federal
  Election Campaign Act was passed by Congress
• Nixon reluctantly signed
• Watergate
• 1974 Federal Election Campaign Act Amendments

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• 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

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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 all candidates (25k) Struck down (freedom of speech)
Cap on spending on behalf of candidates by parties Affirmed

• www.mit.edu/17.251/finance.ppt

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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

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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

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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

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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.

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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.

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• 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.

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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

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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

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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.

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• 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
• 19741,146 PACs
• 19864,157 PACs
• Congress applied ruling to parties
• Contributions for these activities came to be
  known as soft money

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• How was it exploited?
• Candidate campaign raises money for party
  committee, then party committee spends it on
  activities that support the candidate

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Soft money growth( in millions)
Source Center for Public Integrity
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Independent expenditures

• Individuals or organizations could make
  independent expenditures as long as they were
  independent of a candidate or official campaign
  committee.
• NRA
• MoveOn.Org
• Willie Horton
• Swift Boat Veterans

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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

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Public finance

• By the 1990s, public finance money drying up
• Too many candidates getting too much money
• Increase in check-off to 3, but fewer checking
  off
• Decline in public support for parties

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Source Public Citizen from FEC data
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Still more reform

• Clinton/Gore fundraising scandals
• McCain-Feingold
• Very controversial
• First Amendment
• Bias toward major parties
• Opposed by diverse coalition
• Mitch McConnell

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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

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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)
Millionaires amendment
Stand by your ad (Im Bruce Lunsford and I endorsed this message)

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Challenged in McConnell v FEC

• SCOTUS allowed the great majority of BCRA to stand

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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.

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• 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.

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• 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/

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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.

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• A major portion of BCRA was diluted in FEC v.
  Wisconsin Right To Life (2007) when the SCOTUS
  decided that the group could not be refused the
  right to advertise during the 60-day window if
  their commercials could reasonably be seen as a
  political appeal other than support for or
  opposition to a political candidate
• More recently, millionaires amendment found
  unconstitutional

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George W. Bushs 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 Bushs primary
  campaign
• 100K plus Pioneers
• Primary funding total 95.5 million
• Took federal dollars for general election

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Bundling
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Source Campaign Finance Institute
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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.

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• The Bush and Kerry campaigns evaded the
  disclosure regulation for earmarked contributions
  through the new style of bundling activity in
  which identification numbers are assigned to each
  bundler, who in turn ask contributors to write
  the bundlers ID number on the checks and then
  give the checks to the campaign on their own.
  This allowed the bundler to get credit from the
  campaign for the contributions, while
  sidestepping the FECs official disclosure
  requirements.

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Source Campaign Finance Institute
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Internet innovations in finance

• Howard Dean developed new means to expand funding
  through small individual donations collected via
  the Internet
• Barack Obama expanded on the idea and has
  generated huge sums through small donations on
  the Internet
• 150 million in September 2008
• Ron Paul extremely successful fundraiser during
  Republican primaries