Transcript Buyer Beware: Financing Presidential Campaigns Artemus Ward Dept. of Political Science Northern Illinois University [email protected].

Buyer Beware:
Financing Presidential Campaigns
Artemus Ward
Dept. of Political Science
Northern Illinois University
[email protected]
Introduction
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In America, money equals political speech. Therefore,
contributions to campaigns and spending by campaigns
are a form of expression protected by the First
Amendment.
However, some regulations are allowable—specifically
those that prevent corruption or the appearance of
corruption.
In the following lecture we will cover how expensive it
has become to run for president, how fundraising takes
place, and the limits that congress has imposed on the
process.
Do campaign contributions necessarily corrupt the
political process?
The Rising
Costs of
Campaigns
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Modern campaigns are expensive
Large sums must be raised to be
competitive
-- House races: roughly $1,000,000
-- Senate races: often several million $
-- Presidency: hundreds of millions $
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In 2008, Barack Obama raised $779 million while
John McCain raised $384 million.
Contributors
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Individuals
Political Action Committees (PACs)
Political Party Committees
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RNC and DNC
House and Senate Campaign Committees
State party committees
Non-profit advocacy groups – 527, 501(c)3, and
501(c)4 groups
Hard Money
v.
Soft Money
1. “Hard Money” = regulated money
-- comes via individual small contributions directly to
campaigns
-- must be reported to FEC
-- corporations and unions may not contribute hard money.
2. “Soft Money” = unregulated money spent by individuals
or groups who want to voice their opinions
1974 Federal Election Campaign Act (FECA)
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Passed, in part, in reaction
to the 1972 election and
Watergate scandal.
Goals:
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Limit “fat cat” donors
Encourage small donors
Encourage disclosure of
sources
Major Provisions of FECA
1.
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Public funding of presidential elections
 Taxpayers contribute voluntarily. Currently $3 but less
than 10% of taxpayers contribute
 Matching funds system for primaries and general
election
 Problem? Not enough to run a winning campaign.
 John McCain in 2008 last major candidate to participate.
Limits on campaign spending
 only for presidential candidates who accept public
funding
 as a result, more campaigns are declining public
support believing they can raise more on their own
Major Provisions of FECA
3.
4.
Limits on direct contributions to candidates
 For individuals: $2,500 per candidate
 For PACs: $5,000 per candidate
 For parties: $5,000 per House candidate
and $43,100 per Senate candidate
Allows for coordinated expenditures
 expenditures for campaign services like
polling, issue research, producing ads
 Parties spend considerable $ this way
Major Provisions of FECA
5.
Independent expenditures
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6.
Expenditures for campaign ads and get-out-vote drives
not coordinated with campaigns
Parties and PACs must use hard money for this
Under the old rules, 527s and 501Cs could use soft
money, but ads couldn’t be run within 60 days of general
election. This was struck down by the Supreme Court in
Citizens United vs. FEC (2010).
Ad sponsors must be identified
Disclosure Requirements
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contributions and expenditures of $200 or more must be
reported to FEC
information is available to public
Individual Donors
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Small donations—anything from $1-$10 can also have a
huge effect.
In 2008, President Obama raised tens of millions of dollars
via the internet through small donations by individuals.
His campaign regularly sends out e-mails to supporters
such as this one from March 31, 2012:
Dear _________.
This is important: Thank you.
You're why I decided to do this five years ago -- and
why we have the chance to finish it.
The next three months will be tough.
Can you pitch in $10 so we're ready for them?
https://donate.barackobama.com/Today
Thank you,
Barack
Individual Donors
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Should candidates cultivate many small
donations or fewer large donations?
Consider the October 2007 totals for the
2008 Democratic presidential
nomination.
Obama’s strategy of targeting small,
individual donors via the internet and
social media allowed him to keep pace
with the far-better, well-connected
former First Lady and Senator from New
York Hillary Clinton.
Obama’s success among small donors
transformed campaign fundraising and
every candidate that came after him
employed technology to reach small
donors.
Location, Location, Location
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Through the
end of July,
2008, Sen.
Barack
Obama had
raised most
of his
money from
individuals
in Chicago,
New York,
San
Francisco,
Los Angeles
and other
major cities.
Bundling
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Since the 1970s, there have been strict limits on how much money an individual
can donate to a presidential candidate in a given election—$2,500.
But there’s no limit to how much they can “bundle” by soliciting donations from
friends and business connections. As a result, the top bundlers hold fundraising
dinners and events where they raise anywhere from half-a-million to a million
dollars in return for unique access to the candidate.
So the McCain-Feingold campaign-finance law that went into effect in 2002, which
banned a variety of “soft money” loopholes that allowed donors to circumvent
these limits, made bundlers a much bigger part of the money-in-politics story.
Whether contributed via a bundle or a one-off donation, such “hard money” goes
straight to a candidate’s coffers, to be used however the campaign sees fit.
And it’s the hard money that matters most. Why? Because candidates and their
campaigns do not have direct control over Super PAC money—and that can lead
to real problems.
For example, the famous “swift-boating” campaign against John Kerry in 2004
shows the importance of hard money. When the anti-Kerry ads hit the air, Kerry’s
campaign was cash-strapped, so the fact that the independent political action
committees supporting the Mass. senator—known as 527s—were lead-footed in
their response may have doomed his campaign. If the campaign had had more
hard cash on hand, things could have gone differently.
Obama Bundlers: One Year Out
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Consider that over one year before the 2012 general
election, President Obama had already raised $56 million
from bundling.
The biggest bundlers? Lawyers and investment bankers.
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Who are the Bundlers? Some
of the top 2012 Obama
Bundlers:
Roger Altman, Founder and
Chairman, Evercore Partners
Fred Eychaner, CEO, Newsweb
Jeffrey Katzenberg, CEO,
Dreamworks
Steve Spinner, former Energy
Dept. official
Jonathan Lavine, Managing
Director and Chief Investment
Officer, Sankaty Advisors, an
affiliate of Bain Capital
Penny Pritzker, Founder,
Chairman, and CEO of PSP Capital
Partners and its affiliate
Andy Spahn, Founder and
President of Andy Spahn &
Associates, Inc.
Bundling = Access, Spoils
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Overall, 184 of 556, or about one-third, of 2008 Obama
bundlers or their spouses joined the administration in
some role. But the percentages are much higher for the
big-dollar bundlers. Nearly 80 percent of those who
collected more than $500,000 for Obama took “key
administration posts,” as defined by the White House.
More than half the ambassador nominees who were
bundlers raised more than half a million.
The big bundlers had broad access to the White House
for meetings with top administration officials and glitzy
social events. In all, campaign bundlers and their family
members account for more than 3,000 White House
meetings and visits. Half of them raised $200,000 or
more.
Some Obama bundlers have ties to companies that stand
to gain financially from the president’s policy agenda,
particularly in clean energy and telecommunications, and
some already have done so. Level 3 Communications, for
instance, snared $13.8 million in stimulus money. At
least 18 other bundlers have ties to businesses poised to
profit from government spending to promote clean
energy, telecommunications and other key administration
priorities.
PACs
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Political Action Committees (PACs) raise money to support candidates
and issues. They solicit donations and then give the money directly to
candidates.
In 1947, as part of the Taft-Hartley Act, the U.S. Congress prohibited
labor unions or corporations from spending money to influence federal
elections, and prohibited labor unions from contributing to candidate
campaigns (an earlier law, the 1907 Tillman Act, had prohibited
corporations from contributing to campaigns).
Labor unions moved to work around these limitations by establishing
political action committees, to which members could contribute.
There are limits to the amount of money individuals and groups can
contribute to PACs.
Super
PACs
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The 2010 election marked the rise of the Super PAC -- officially
known as "independent-expenditure only committees".
Super PACs raise unlimited funds from corporations, unions, other
groups, and individuals -- a practice upheld by the U.S. Supreme
Court in its 2010 decision in Citizens United v. Federal Election
Commission.
But unlike PACs, which can give money directly to candidates, Super
PACs cannot.
They instead, spend their money in support of specific candidates
and issues but are not supposed to coordinate that spending with
campaign staff.
Citizens United v. FEC (2010)
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In Buckley v. Valeo (1976) the Supreme Court struck down
government restrictions on campaign spending by
candidates, groups, or individuals but upheld restrictions on
campaign contributions reasoning that the latter can give
rise to corruption or the appearance of corruption.
In Citizens United, the justices struck down a federal law
that prohibited corporations and unions from using their
general treasury to fund "electioneering communications"
(broadcast advertisements mentioning a candidate) within
30 days before a primary or 60 days before a general
election.
The justices relied on the principle that money is a form of
political speech, protected by the First Amendment.
Justice Anthony Kennedy wrote for the 5-4 majority: “If the
First Amendment has any force, it prohibits Congress from
fining or jailing citizens, or associations of citizens, for
simply engaging in political speech.”
In dissent, Justice John Paul Stevens wrote: “A democracy
cannot function effectively when its constituent members
believe laws are being bought and sold.”
The 2012 Election
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With both campaigns opting our of public financing and lifting
of restrictions via the Citizens United decision, the 2012
election has easily been the most expensive in history.
The Obama and Romney campaigns have raised $2 billion –
about $1 billion each.
Yet outside groups have raised an additional $1 billion.
Conclusion
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Money has always played an important role in campaigns and elections
and is increasingly crucial in the modern era of media-driven elections
where campaign advertising costs a significant amount of money.
Watergate-era reforms were put in place to stop the influence that
campaign donations bought with officeholders.
Yet the Supreme Court has struck down attempts by Congress to limit
money in campaigns under the rationale that money equals political
speech.
While candidates are able to spend freely and there are limits to direct
contributions to candidates, individuals and groups continue to find
creative ways to indirectly spend money on advertising to influence
voters.
Should/will the Supreme Court overturn Buckley v. Valeo and allow
unlimited direct contributions to candidates?
Sources
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Lichtblau, Eric, “Obama Backers Tied to Lobbies Raise Millions,” New York Times,
October 27, 2011. http://www.nytimes.com/2011/10/28/us/politics/obama-bundlershave-ties-to-lobbying.html?_r=1
Schulte, Fred, John Aloysius Farrell, Jeremy Borden, “Obama Rewards Bib Bundlers
with Jobs, Commissions, Stimulus Money, Government Contracts, and More,” iWatch
News, June 15, 2011. http://www.iwatchnews.org/node/4880/
“Seven Big Obama Bundlers,” The Daily Beast, August 2, 2012.
http://www.thedailybeast.com/galleries/2012/08/02/seven-big-obama-bundlers.html