Chapter 54: Campaign Finance

“Money, get back
I’m all right, Jack, keep your hands off of my stack
Money, it’s a hit
Don’t give me that do goody good bullshit
I’m in the high-fidelity first-class traveling set
And I think I need a Learjet”

—Pink Floyd (1)

 

“The concentration of wealth in America has created an education system in which the super-rich can buy admission to college for their children, a political system in which they can buy Congress and the presidency, a health-care system in which they can buy care that others can’t, and a justice system in which they can buy their way out of jail.”

—Robert Reich (2)

The Role of Money in American Politics

The American electoral system revolves around money. Its role in American elections is so pervasive that attempts to write about it in detail quickly become outdated. Therefore, it is more helpful if we get an overall impression of how money operates in American elections. Here are some things we can say with confidence.

Money is so central to a person even considering whether they could enter politics that political scientists and journalists often speak about the money primary, by which they mean “the competition of candidates for financial resources contributed by partisan elites before the primaries begin.” (3) Money is the ticket to success in American politics. You must either have enough to finance your own campaign, come from the elite strata where you have friends, contacts, and supporters with disposable wealth to donate to your campaign, or you must ingratiate yourself to the elites who can fund your campaign.

Money and Politics
Money and Politics

Because elections are so expensive, and we don’t have publicly finance campaigns, politicians appear to be in a never-ending race for money. It typically takes a couple of million dollars to win a race for House of Representatives and anywhere from two to ten times more than that to win a Senate race. In presidential races, the candidates together spent in the billions of dollars—not counting outside spending by organized interests on behalf of one candidate or the other. (4) Congressional members can easily spend half their working time raising money rather than legislating. According to Newsweek, “A leaked PowerPoint presentation from the Democratic Congressional Campaign Committee (DCCC) revealed that an ideal daily schedule consists of four hours of time spent on the phone.” (5) The need for money has even changed the very nature of congressional leadership. As law professor Lawrence Lessig put it, “If leaders had once been chosen on the basis of ideas, or seniority, or political ties, now, in both parties, leaders were chosen at least in part on their ability to raise campaign cash. Leading fundraisers became the new leaders. Fundraising became the new game.” (6)

Most money in American elections comes from corporations and the wealthy. Corporations and wealthy individuals contribute the bulk of the money to federal elections. According to data from the Federal Election Commission, we can safely say that corporations and wealthy individuals contribute at least two-thirds of federal-election money. An analysis in 2010 by Good Magazine revealed that .26 percent of the American population made up 68 percent of the money contributed to congressional members. (7) Former U.S. Secretary of Labor Robert Reich reported that while in 1980 the richest .01 percent of Americans accounted for 15 percent of all campaign contributions, by 2016 the richest .01 percent of Americans accounted for 40 percent of all campaign contributions. (8) Some candidates such as Bernie Sanders and Elizabeth Warren did a good job crowd-sourcing their campaigns with large numbers of small donors, but they lost to other candidates in 2016 and 2018. Wealthy individuals can finance part, most, or all of their own campaigns. Moreover, wealthy people often act as bundlers, or people who organize and collect contributions to one campaign from a variety of other wealthy people. (9) As you can imagine, a candidate from the elite who knows a few other elites who are willing to act as bundlers is in a very good position indeed.

The candidate who spends the most money tends to win. If you were a betting person and the only information you had about a particular race for the House of Representatives or the Senate was the amount of money the candidates were spending, you would be wise to bet on the candidate who was spending the most money. Historically, according to the Center for Responsive Politics, the better financed House candidate wins about 90 percent of the time and the better financed Senate candidate wins about 80 percent of the time. (10) Most congressional races are financially uncompetitive, meaning that one candidate is spending two or more times the money of the other candidate.

Money in American elections pushes politics in a conservative direction. Because corporations and the wealthy are the principal sources of most campaign money, the entire campaign finance system is biased in favor of conservative candidates and against candidates who would like to see real progressive changes. Corporations and the wealthy are beneficiaries of the current system, so it is typically not in their interest to support candidates who would shake up the status quo. Back in 1995, political scientist Thomas Ferguson coined the phrase the investment approach to American party politics, in which he argued that ordinary voters cannot afford the costs of paying attention to political issues, researching candidates, watching what they do once elected, and rewarding or punishing them if they don’t pursue policies beneficial to those ordinary people. Who can afford those costs? Corporations and wealthy people have the resources to monitor politics, donate to candidates to reward them for good behavior when in office, and punish them if they don’t follow the wishes of the elites. Moreover, these individuals and corporations have much to lose if the politicians don’t act the way they would like, so they invest in those that will. Corporations and the wealthy are invested in politics in ways that ordinary people cannot match, which pulls the entire system to the Right or conservative side of the ideological spectrum. (11)

The Supreme Court has stricken down many attempts to reign in money in American elections. Consider the recent track record of the Court:

  • Buckley v. Valeo (1976) Overall campaign spending, personal spending on one’s own campaign, and independent expenditures cannot be capped.
  • FEC v. Wisconsin Right to Life (2007) The government cannot stop outside groups from spending on political advertising in the period before an election. 
  • Citizens United v. FEC (2010) The government cannot place limits on the amount of outside spending, and corporations can spend directly to support or oppose campaigns. 
  • Arizona’s Free Enterprise Club’s Freedom PAC v. Bennett (2011) Public financing systems cannot use escalating matching funds.
  • American Tradition Partnership v. Bullock (2012) The Court struck down Montana’s ban on corporate spending on state elections that dated back to 1912.
  • McCutcheon v. FEC (2014) A donor’s overall spending on federal campaigns cannot be capped. (12)

Enforcement of federal election laws is weak. America’s weak election laws are enforced by a weak agency. The Federal Election Commission (FEC), charged with regulating America’s election and campaign finance laws, has long been referred to as “The little agency that can’t.” (13) Structurally, the nature of the commission produces deadlock because the Democrats and Republicans each have the same number of commissioners. The FEC is under-funded, under-staffed, and has a perpetual backlog of cases so that candidates and organized interests have little fear of being prosecuted for alleged violations. (14) Sometimes, the FEC is given a near impossible task. Take the case of coordination: outside groups are forbidden from coordinating their expenditures with political campaigns. It’s extremely difficult to prove, especially for a hobbled agency like the FEC. (15)


Attempting to Regulate Money in American Elections

We have a long history of trying to regulate money in politics. The Tillman Act of 1907 banned corporations from making direct campaign contributions, and this prohibition was extended to unions in 1943. Over time, laws and court decisions have created a fairly confusing medley of rules and allowances. Generally speaking, we divide campaign finance into hard money and soft money.

Hard money contributions are regulated by the Federal Election Campaign Act (FECA), which Congress passed in 1971 and was significantly amended in 1974. Hard money refers to contributions made directly to a political campaign. You should be aware of the following provisions of the Federal Election Campaign Act:

  • Created the Federal Election Commission (FEC) to enforce federal campaign regulations. However, Congress keeps the FEC chronically under-funded and understaffed, making it difficult to police elections. In many instances, campaign finance-law violators are let off with a slap on the wrist or with a plea bargain arrangement because the FEC does not have the resources to pursue the matter. Moreover, the commission is evenly divided between Republicans and Democrats, which often results in paralysis.
  • Limited the amount of money that candidates could give to their own campaigns. Significantly, the Supreme Court struck down this provision in the case of Buckley v. Valeo (1976). The Court said the limitation of self-contributions was a violation of the candidate’s freedom of speech.
  • Required campaigns for federal office to report periodically to the FEC all its campaign contributions as well as its expenditures. These reports are a matter of public record, itemizing all contributions and expenditures greater than $200.
  • Limited the amount of money that individuals and organized interest groups could donate to federal candidates. Individuals are limited to $2,800 per candidate per election, and political action committees are limited to $5,000 per candidate per election. If a candidate is involved in a primary election and a general election, you may donate the maximum amount to them on both of those occasions.
  • Created presidential candidate public financing. This takes the form of a little box on your federal tax forms that allows you to allocate a small amount of your taxes to a presidential election fund. If candidates accept this money, they must abide by limits on their total spending in the presidential race.  In 2008, Barack Obama became the first candidate to opt out of public financing in the general election. In 2012, Obama and Mitt Romney both opted out of public financing, and candidates in subsequent presidential elections also opted out.

The only legal way for organized interests to donate money directly to campaigns is for them to create a political action committee, or PAC, which is an FEC-recognized entity that can legally engage in campaign finance. There are different types of PACs that give directly to campaigns, and you should know two of them. Traditional PACs are entities created by organized interests—corporations, unions, and interest groups—as vehicles to raise money and funnel it to candidates. A leadership PAC is established or controlled by a political candidate or a person who holds federal office to raise and give money to other politicians. Leadership PACs are separate from the candidate or office holder’s election or reelection committee. Congressional members often have leadership PACs to raise money and support candidates or other congressional members with whom they share ideology, party affiliation, or policy positions.

The amount of PAC money in congressional races has more than doubled in the last twenty years. There are more than 4,000 PACs registered with the FEC. PACs give the overwhelming majority of their money to incumbents, or those who are in office and are running for reelection, as opposed to challengers. There are three reasons why PACs favor incumbents. For one thing, incumbents tend to win. It’s a safe bet to give money to an incumbent who already votes favorably to your organized interest. Incumbents have Washington experience and might sit on important committees. Committee and subcommittee chairmen tend to receive a great deal of PAC money. Finally, incumbents have a voting track record on national issues, so they are often more of a known commodity than are challengers.

Soft money originally referred to contributions to political parties that were supposed to be used for “party building measures,” but instead, were used to help elect particular candidates. Technically, the parties were not supposed to use soft money to directly help individual candidates, but in the 1990s, both parties violated the law—especially in presidential races—and used the money for campaign commercials for candidates. Because there are no limits on soft money contributions, corporations especially began to flood the parties with soft money. Soft money now refers to largely unregulated independent expenditures by parties and organized interests to support or oppose candidates. These organizations buy advertisements, establish phone banks, pay for people to go door to door for a candidate, and so forth.

In the spring of 2002, Congress passed the Bipartisan Campaign Reform Act, popularly known as the McCain-Feingold Campaign Finance Reform Bill, and President Bush signed it into law despite the objections of many in his own party. This law banned soft-money contributions to the national party organizations, doubled the hard money limits of the FECA, and restricted the airing of advocacy ads sixty days before a general election. In 2003, a federal district court struck down key provisions of the law, but the Supreme Court upheld the law in December of that year. Rather quickly, however, the Court decided to revisit organized-interest sponsored advocacy ads. In 2010, the Court ruled in Citizens United v. Federal Election Commission that key restrictions on corporate or union spending in elections were unconstitutional. Because of this decision, corporations and unions are free to make advocacy ads during the election period and are free to make unlimited independent expenditures in favor of—or opposed to—specific candidates. As the Center for Responsive Politics puts it:

“[Citizens United ] permits corporations and unions to make political expenditures from their treasuries directly and through other organizations, as long as the spending—often in the form of TV ads—is done independently of any candidate. In many cases, the activity takes place without complete or immediate disclosure about who is funding it, preventing voters from understanding who is truly behind many political messages.

As a result of the Citizens United case and another federal case called SpeechNow v. FEC (2010), outside spending has exploded. Outside spending in 2016 was 15 times greater than in 2008, and outside spending in the 2020 election cycle more than doubled that of 2016. (16) The vehicles for much outside spending are super PACs, a new kind of organization that falls under the soft money category. Where traditional and leadership PACs donate money directly to campaigns, super PACs cannot do so, but they can spend unlimited amounts of money on behalf of one candidate or another. They must do so independently of the candidate they are supporting, meaning they cannot coordinate their activities with the campaign they are supporting. They can raise unlimited amounts of money from corporations, unions, and individuals, but they must disclose their donors to the FEC.

A special kind of soft money is called dark money. Under sections 501(c)(4) and 501(c)(6) of the tax code, politically active nonprofit organizations can raise unlimited money and spend it to support or oppose candidates. The most interesting thing about these organizations—and the reason they are called “dark”—is that they don’t have to disclose the sources of their money. These organizations are supposed to be primarily social-welfare groups rather than overtly political, but neither the IRS nor the FEC has cracked down on them.

Conservative dark money organizations funnel corporate and elite money to promote presidential, congressional, and judicial candidates who fight against increasing the minimum wage, organizing rights for workers, worker safety laws, universal health care, background checks for gun purchases, environmental regulations, policies to fight the climate emergency, and many more. In the first several elections following the Citizens United Supreme Court decision, Republican-leaning dark money organizations outspent Democratic-leaning dark money organizations, although dark money groups that support corporate Democratic candidates gained much of that ground back in 2018 and 2020. (17)

It is unlikely that any form of privately donated campaign money—coming as it does primarily from corporations and the top 5 percent of the population—is ever going to support truly progressive candidates. This is why progressive candidates like Bernie Sanders and Elizabeth Warren tried to rely primarily on small donations from ordinary people. True progressive change that would greatly improve the lives of ordinary people is blocked by monied interests. As professor Lawrence Lessig put it, money “will always block reform, at least so long as the essential element to effecting reform, Congress, remains pathologically dependent upon the campaign cash that those who block reform can deliver.” (18)

Summation

Let’s end this chapter with the realization that campaign finance can be quite confusing. It’s also a bit depressing if we are interested in a government that serves the public interest. Here’s a quick chart to help you keep it straight:

Summary of Hard and Soft Money Characteristics

What If. . . ?

 

What if in every election cycle, the federal government gave all voting age adults four “democracy vouchers” of $10 each that they could donate to any federal campaign or donate to no one? What if candidates for federal office could decide whether to raise money from corporations, wealthy individuals and PACs, or they could raise money via these democracy vouchers, but not both? (19)

 

References

 

  1. “Money” written by Roger Waters of Pink Floyd.
  2. Robert B. Reich, The System: Who Rigged It, How We Fix It. New York: Alfred A. Knopf, 2020. Kindle edition. Page 4 of 198.
  3. Randall E. Adkins and Andrew J. Dowdle, “The Money Primary: What Influences the Outcome of Pre-Primary Presidential Nomination Fundraising?” Presidential Studies Quarterly. June, 2002. Page 257.
  4. See current figures at Center for Responsive Politics website: www.opensecrets.org
  5. Stacey Selleck, “Congress Spends More Time Dialing for Dollars Than on Legislative Work,” U.S. Term Limits. April 26, 2016. Ryan Bort, “John Oliver Breaks Down the Disturbing Truth of Congressional Fundraising.” Newsweek. April 4, 2016.
  6. Lawrence Lessig, Republic, Lost: How Money Corrupts Congress—and a Plan to Stop It. New York: Twelve, 2011. Page 94.
  7. See current figures at Center for Responsive Politics website: www.opensecrets.org. See the Good Magazine infographic here.
  8. Robert B. Reich, The System: Who Rigged It, How We Fix It. New York: Alfred A. Knopf, 2020. Kindle edition. Page 16 of 198.
  9. Peter Overby, “Explainer: What is a Bundler?” NPR. September 14, 2007. Maggie Severns, “Biden Reveals Deep Bench of Campaign Bundlers,” Politico. December 27, 2019.
  10. Anonymous Author, “Did Money Win?” Center for Responsive Politics.
  11. Thomas Ferguson, Golden Rule: The Investment Theory of Party Competition and the Logic of Money Driven Political Systems. Chicago: The University of Chicago Press, 1995. See his quick synopsis of this theory on YouTube.
  12. Andrew Prokop, “40 Charts That Explain Money in Politics,” Vox. July 30, 2014.
  13. Benjamin Weiser and Bill McAllister, “The Little Agency That Can’t,” The Washington Post. February 12, 1997.
  14. Dave Levinthal, “Another Massive Problem With U.S. Democracy: The FEC is Broken,” The Atlantic. December 17, 2013. Kelly Ceballos, “Federal Election Commission Must Be Restructured,” League of Women Voters. April 14, 2016. Soo Rin Kim, “FEC Left Toothless With Three Empty Seats Heading Into the 2020,” ABC News. August 27, 2019.
  15. Rachael Marcus and John Dunbar, “Rules Against Coordination Between Super PACs, Candidates, Tough to Enforce,” Center for Public Integrity. January 13, 2012.16. Center for Responsive Politics. At https://www.opensecrets.org/outsidespending/fes_summ.php
  16. The Center for Responsive Politics.
  17. Lawrence Lessig, Republic, Lost: How Money Corrupts Congress—and a Plan to Stop It. New York: Twelve, 2011. Page 191.
  18. Lawrence Lessig, They Don’t Represent Us: Reclaiming Our Democracy. New York: Harper Collins, 2019. Pages 141-142.

 

 

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