Lesson 39: Financing the Campaign
In this lesson, we will learn about regulations that have been passed to
attempt to control the campaign finance process, including the Hatch Act and
the Federal Elections Campaign Act. We will then talk about ways that interest
groups and corporations have worked around campaign donation limitations,
through Political Action Committees, soft money, and more recently, Super PACs
and other organizations. Finally, we will learn about how tax dollars can be
used to fund campaigns and why recent presidential candidates have opted out of
the public funding system.
At one time,
there were no laws governing campaign donations. No records were required for
who was donating and how much was being donated. That changed with the passage
of the Hatch Act.
The Hatch Act was passed in 1939 and restricted the political activities of
government employees. It also prohibited a political group from spending more
than $3 million in any campaign and limited individual contributions to a
campaign committee to $5,000.
Little changed, however,
as contributors got around the new restrictions simply by creating new
organizations.
In 1972, FECA (The Federal Elections Campaign Act) was passed,
taking the place of any campaign laws already in
existence. Amendments to FECA brought about the existence of the FEC.
The FEC (the Federal Election Commission) is the federal regulatory agency
tasked with enforcing federal campaign laws. As a practical matter, the FEC's
role is largely limited to collecting data on campaign contributions.
FECA and
the creation of the FEC ended up being fairly ineffective due to
one major flaw – the FEC had no way of knowing if a campaign had violated any
rules until it was completely over. Then in 1976, Buckley v. Valeo even
overturned the provision that limited the amount a candidate could spend on
their own campaign.
A Political Action Committee (PAC) is a committee set up by and
representing a corporation, labor union,
or special interest group. PACs raise funds for campaign donations.
PACs went on the rise as there was no limit to the number of PACs that
could contribute -- only a limit on *how much* they could contribute, $5000.
Political Action Committees gave corporations and interest groups a chance to
significantly impact elections.
They also found other ways to make an impact.
One way was through Issue Advocacy Advertising. That is advertising paid for by
interest groups that support or oppose a candidate's position on an issue
without mentioning the candidate, voting, or elections.
Corporations and interest groups can indirectly promote a candidate by
promoting the issues, and the funds used for those advertising efforts do not
have to be reported as donations to a campaign.
Soft Money refers to campaign contributions unregulated by federal or state law,
usually given to parties and party committees to
help fund general party activities.
Since it is not given directly to the candidate and the money is not used to
promote a campaign, it is legal to use the money to educate voters and promote
voter-registration.
In an attempt to regulate these new campaign strategies, The Bipartisan
Campaign Reform Act of 2002 banned the use of soft money at the federal level,
but not state and local. It also put a stop to Issue Advocacy Advertising.
The Supreme Court upheld the Bipartisan Campaign Reform Act for the most part.
Issue Advocacy Ads, however, seemed protected by the First Amendment, so the
Court only allowed the prohibition of such ads when the ad was clearly
promoting a candidate.
With the current state of campaign laws, campaigns are funded in
two different ways. The first is through donations directly to the candidate,
limited to $2500 from each individual.
The other way is through Independent Expenditures, which are unregulated
political expenditures by PACs, organizations, and individuals that are not
coordinated with candidate campaigns or political parties.
Independent Expenditures were made possible as a result of Citizens United v.
FEC in 2010. The Court ruled that there was no way independent expenditures
could be legally limited.
A Super PAC is a political organization that
aggregates unlimited contributions by individuals and organizations to
be spent independently of candidate committees.
A Super PAC is the combination of traditional PACs and independent
expenditures. They can accept an unlimited amount of funds from individuals and
use them for political activities that are not coordinated with campaign
candidates.
527s are organizations that
have tax-exempt status and are able to raise funds with no limits for the
purpose of pushing issue advocacy ads and getting voters to vote. They have
been replaced for the most part by Super PACs, but they are still active.
Like 527s, 501(c)(4) organizations are tax exempt and
have no limits on how much funds they can raise for independent expenditures.
Their advantage is that they do not have to report how they spend their money
to the FEC. Plus, they can keep donor identities anonymous.
Issues did arise in
the way 501(c)(4)s were able to independently promote a candidate. But, the FEC
has yet to rule on any question concerning the legality of their operations.
For candidate committees, even though there are limitations on contributions,
the total funds that
these organizations can collect is not limited and can get quite high. Mitt
Romney versus Barack Obama saw campaign funds reach over $1 billion for each
candidate.
That is because, while an individual can only donate a maximum of $2600 to each
candidate, they can contribute to as many candidates as they want. Plus, they
can contribute to the party.
Public funding is supplied from
tax dollars when people file their taxes and choose to contribute. A candidate
can use public funding and raise funds during the primary that the system would
match. The downside is, candidates then have to rely solely on public funding
in the general election and there are spending limits.
Candidates can raise more on their own if they opt out of the public funding
system and President Obama was the first to do so. He raised more money on his
own and candidates after him have followed suit.