By Joan Mandle
This paper is a very brief overview of the movement to change the campaign financing system in the United States. For more information, see references and websites referred to throughout the paper and read “Why We Need Reform” on this website.
I. U.S. Campaign Finance Law History
The initial reform of the campaign financing system occurred between 1971 and 1974. It was largely a response to the Watergate scandal, but it was also an attempt to remedy the negative publicity about an individual donor who literally delivered a suitcase of cash to Richard Nixon's re-election campaign. Members of Congress felt they needed to do something to restore the public's dwindling faith in government. Their response was to pass a series of laws known as the Federal Election Campaign Act (FECA).
The FECA legislation altered a number of aspects of the financing of election campaigns for federal office. For the first time, it established rules that limited contribution levels to candidates and parties. This regulated money came to be known as "hard money." Individual contributions to any single candidate were limited to $1,000 in the primary campaign and $1,000 in the general election of any given year. The Supreme Court accepted these limits in order to, in their words, “avoid the appearance of corruption” of candidates by big-money donors.
Second, although corporations and unions were prohibited from giving money directly from their treasuries, FECA allowed Political Action Committees (PACS) to be organized by individuals, unions, organizations, or corporations. These PACS could collect voluntary contributions from individuals of up to $5,000 (often from members of the unions or employees of corporations that established the PAC). The PACS then were allowed to contribute directly to as many candidates as they wished. Their contributions too were regulated, however, with "hard money" limits to a single candidate of $5,000 in the primary and $5,000 in the general election.
FECA also created a mandatory reporting system for all contributions to and all expenditures made by campaigns. Money associated with election campaigns would now be "disclosed" and made public periodically, according to a schedule established by the newly organized Federal Election Commission. This Commission was created to oversee the implementation of the disclosure system, and to rule on any failures to comply by candidates. These folks now oversee the rules for money in campaigns and you can explore the Federal Election site – lots of interesting information - www.fec.gov
In another path-breaking move, FECA established a voluntary system of public financing for the Presidential primaries and general elections. From its inception through 1996, every single Presidential candidate voluntarily participated in this public financing system until 2000 when George W. Bush refused public money and financed his presidential primary bid exclusively with private money. Then in 2008, Barack Obama financed both his primary and general election with private money and the system was effectively dead. The main reason was that Congress refused to increase the public financing available to candidates, at the same time that the cost of election campaigns skyrocketed. So to win, candidates felt they needed to again rely on private money.
In January 2010, the Supreme Court reversed a decades old ban on spending for political speech by corporations and unions. Corporations and unions could now spend unlimited amounts of money from their treasuries to influence elections with ads, flyers etc. (though the money could not go directly to candidates). It meant that rich corporations could flood the airwaves with ads, thus dominating the political process and dialogue during an election, or threaten to do so in order to get politicians to vote in their interests rather than in the public interest.
II. Reform Strategies
Since the middle 1970s, it has become increasingly clear that the laws are inadequate to deal with the growing problems of big donors – especially corporate-based contributors. Experts believe that the dominance of big money in politics is today worse than ever. Not only have the costs of elections escalated, but the number of competitive races is declining, as the advantages of incumbency fundraising overwhelm challengers.
In response both to these obvious problems and also to polling data indicating that a large majority of Americans favor reform of the financing system, a number of strategies have emerged to attempt to change the way election campaigns are financed.
A) LOWER CONTIBUTION LIMITS: One strategy, adopted by many reform groups since the 1970s, has been to try to lower contribution limits at the federal, state, and/or local levels. Reformers have sought to lower the legal limits of individuals and PACS to candidates in order to make money a less important ingredient in political campaigns. Groups such as Common Cause and the USPIRG have a long history of fighting for lower contribution limits. But very low limits at the state and local levels have often been struck down by the courts.
B) BI-PARTISAN CAMPAIGN REFORM ACT: This is the only campaign finance reform victory since the ‘70s. In March 2002 Congress passed the Bi-Partisan Campaign Reform Act to curtail the growth of so-called "soft money" contributions. These were unlimited political contributions that were not “hard” – i.e. not regulated by law. This reform, also known as McCain-Feingold for its Senate sponsors, Senator John McCain (R-AZ) and Russ Feingold (D-WI) was passed with the help of national groups like Common Cause and the Sierra Club.
However, the effectiveness of this law in regulating big private money in election campaigns has proved to be ambiguous at best. On the one hand, the law included a doubling of the 1974 "hard money" limit that individuals could contribute to federal candidates. Now individuals could give $2,300 to as many candidates as they wished for a primary and then again for a general election. It did put limits on “soft” money contributions, but they were still extremely high.
Thus the reality is that the problem of private money in politics has not disappeared. One major problem is the ease with which wealthy donors circumvent the “hard” money contribution limits. They use a technique known as bundling. Bundling enables a single individual or group to take credit for raising large amounts of "hard dollars" that go directly to a particular candidate. Bundling means that an individual collects checks for the maximum "hard money" ($2,300) contribution written to a particular candidate from a large number of individuals (often family members, friends, or colleagues in a law firm or corporation). The money is then "bundled" together and then delivered to the candidate by that individual, thus indicating clearly who is responsible for the "bundle." The candidate is then as beholden to the "bundler" as she/he would have been to an individual contributor who made a campaign donation of hundreds of thousands of dollars.
C) PUBLIC FINANCING: Thus far, the most successful strategy has been the public financing of elections. Public financing is not a new model of campaign finance reform. It has been implemented in one form or another for decades at both the local and state levels (and of course in the Presidential primary). The system is voluntary; a candidate cannot be coerced into participating in a public financing system; there are caps put on the amount of public money a candidate can receive. There are three types of public financing: matching funds; full public financing grants; and hybrid models with features of both.
1) Matching grants: The most common form of public financing is a matching system. In a match, a candidate is offered public money that matches the dollars she/he has raised from individual donors. In existing systems the match ranges from one public dollar for every private dollar donated, to six to one as in New York City's public financing system. In most matching systems, only smaller contributions are matched, thus raising the importance to candidates of smaller contributors. A significant number of states and cities have some public financing as part of their campaign financing system. By making some public money available, matching systems begin to erode the dominance of private funding, but it is also the case that, depending on the size of the match, private "hard money" can still play a significant role in campaigns run under this system.
2) Clean Elections or Voter-Owned Elections: A newer system of public financing that has been implemented at the state level is full public financing. This innovative model, often referred to as Clean Elections, eliminates private money from campaigns by offering candidates the full amount that can be legally spent on a race in return for their voluntary agreement to raise no private dollars and stay within the spending limits set. In the states of Maine, Massachusetts, and Arizona as well as the city of Albuquerque, NM, voters passed Clean Elections legislation by initiative; and in North Carolina, New Mexico, Vermont, Connecticut and the city of Portland, Oregon full public financing systems for specific races have been passed by the legislature. (The Massachusetts law was invalidated by an act of the legislature). Some of the positive results of Clean Elections systems that are in place have been to increase the diversity of candidates, especially with increased numbers of women and minority individuals running for office, to create more competitive elections, to make elected officials accountable to their constituents, to limit the amounts of money spent in campaigns, and to restore the faith of citizens in an open and fair political system. (See Public Campaign's materials on Clean Elections 101.) Unfortunately in 2010 several courts decisions rules that a key provision of clean elections, the ability to give “clean” candidates additional public grants if they are badly outspent by privately funded opponents – is unconstitutional. This calls into question the continued effectiveness of a Clean Elections full public financing model.
3) Hybrid Public Financing: New systems that combine matching funds from small donors with substantial public grants to qualified candidates are a third kind of public financing option. The hybrid system offers no addition funds to an outspent publicly financed candidate so it is not unconstitutional. The proposal in Congress for a Fair Elections Now Act is such a system. Candidates would receive a public match on contributions from small donors, and when they have collected a set amount of small donations they would receive a public grant as well. They would also be allowed to continue to raise small donations, and they would receive vouchers to purchase free television time.
The fight for a system of financing elections that allows every citizen to have a voice in the decisions that affect us all is central to a democracy. Each person deserves equal respect in influencing laws and policy. As long as only a tiny fraction of individuals fund campaigns, our laws and policies will fail to reflect the will of all the people. There is widespread agreement that the campaign finance system is broken, and thousands are working hard to fix it. Grassroots groups in almost every state are fighting for more public financing reforms. National organizations like Common Cause, Public Campaign, The Brennan Center for Justice, USPIRG, Public Citizen, and Change join Democracy Matters in a reform coalition that works together to build support for public financing at the Congressional level. A FAIR ELECTIONS NOW ACT has been introduced that would provide a hybrid public financing option for Congressional candidates. There are also many groups working to pass public financing for their city elections as well. Together we can begin to erode the poisonous effects of big money on our political system.
For a more detailed exploration of money and politics check out The FEC and the Federal Campaign Finance Law in the United States. If you are an American history buff you'll love this.