Money in politics

1. Money in politics

2. “Money is the mother’s milk of politics” • Jesse Unruh, Speaker of the California Assembly from 1961 to 1968.

3. Money is the root of all evil.

4. Overall 2010 expenditures http://www.opensecrets.org/overview/index.php

5. Increasing cost of federal elections in the U.S., 1998-2008 Source: OpenSecrets.org

6. Costs of campaigning have risen sharply Source: Center for Responsive Politics /OpenSecrets.Org

7. Mean House campaign expenditures, 2008 Source: Campaign Finance Institute analysis of FEC data

8. The rising cost of winning a seat in Congress in constant 2008 dollars Source: Campaign Finance Institute analysis of FEC data

9. 2006 High and low spenders Source: Center for Responsive Politics/OpenSecrets.Org

10. The cost of the 2010 election • OpenSecrets.org • In Kentucky

11. 2008 Presidential • http://www.opensecrets.org/pres08/index.php

12. 2010 congressional races • http://www.opensecrets.org/overview/index.php

13. The effect of money • The biggest spenders don’t 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

14. The dilemma • To carry out an effective campaign for regional, statewide or national office, you need money—and lots of it • You only have a few ways of getting it • Spend your own • Get it from the government • Get it from your political party • Get individuals to provide it • Get groups or organizations to provide it

15. However, each source presents a problem • Spending your own is financially painful to you • For society, if all candidates must fund themselves, we could quickly get to where only the rich can compete • http://www.opensecrets.org/MT/mt-search.cgi?search=self+finance&IncludeBlogs=8 • Good candidates will not run because it is too expensive

16. 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

17. 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.

18. 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.

19. 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.

20. 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

21. Getting it from the government • Tax checkoff/public funding • Instituted in 1976 for presidential contests • However, expanding it to all contests leads to tremendous increase in costs • Several states have instituted some form of public financing for their statewide offices

22. People cannot direct the money to candidates they really like—just to parties • Extremely unfair to minor parties/independents • Limits set on funds from other sources candidates are allowed

23. 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

24. Source: Public Citizen from FEC data

25. Individual donations • Seeking support from people who want to see your views expressed in government • Like-minded individuals willing to support your campaign because they believe in you • The downside, though, is that those with a lot of money are in a much better position to do this • Instead of running themselves, rich people can generate “the best government money can buy”

26. The Obama campaign was known for having generated much of its funding through small donations--$200 or less • However, when we look at the overall numbers, large donors continue to be the most significant source of funds

27. Small donors v large donors Source: Campaign Finance Institute

28. Presidential contributions 2008 • http://www.fec.gov/DisclosureSearch/mapApp.do?cand_id=P80002801&searchType=&searchSQLType=&searchKeyword=

29. Kentucky District 6 • http://www.fec.gov/DisclosureSearch/HSRefreshCandList.do?category=disH&stateName=KY&congressId=06&election_yr=2010

30. 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 drive up the need for donations

31. 1972 Federal Election Campaign Act • At the end of Nixon’s first term, the Federal Election Campaign Act was passed by Congress • Nixon reluctantly signed • Watergate • 1974 Federal Election Campaign Act Amendments

32. 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

33. Campaign Finance Reform and Buckley II www.mit.edu/~17.251/finance.ppt

34. Campaign Finance Reform and Buckley I www.mit.edu/~17.251/finance.ppt

35. 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

36. 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.

37. 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 • 1974—1,146 PACs • 1986—4,157 PACs • Congress applied ruling to parties • Contributions for these activities came to be known as “soft money”

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

39. 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.

40. Bundling, used extremely effectively by George W. Bush’s campaign • Person soliciting and bundling donations gains clout • Individuals often don’t like their name being tied to a campaign donation • Especially if the candidate is controversial or sleazy

41. George W. Bush’s 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 Bush’s primary campaign • $100K plus “Pioneers” • Primary funding total $95.5 million • Took federal dollars for general election

42. 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.

43. Bundling

44. Source: Campaign Finance Institute

45. PACs • Massive growth since the development of campaign finance reform • The growth of PACs has reduced the role of political parties significantly • However, we may be seeing a reversal of the trend

46. Political Action Committees (PACs) • PACs are organizations set up to provide money to candidates for public office that is neither contributed directly to the candidate nor to a political party

47. In U.S. politics, an organization whose purpose is to raise and distribute campaign funds to candidates seeking political office. PACs rose to prominence after the Federal Election Campaign Act (1971) limited the amount of money any corporation, union, or private individual could give to a candidate. PACs were able to circumvent these limits by soliciting smaller contributions from a much larger number of individuals. During the late 20th and early 21st centuries the vast amounts of money raised by PACs greatly increased the cost of running for office and led to efforts to reform this method of financing campaigns.

50. PAC contributions to congressional candidates (in $ millions) [CFI]