Campaign finance in the United States

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Campaign finance in the United States is the financing of electoral campaigns at the federal, state, and local levels.

At the federal level, the primary source of campaign funds is individuals; political action committees are a distant second. Contributions from both are limited, and contributions from corporations and labor unions are prohibited. The Federal Election Commission (FEC) is an independent federal agency created in 1974 by amendments to the Federal Election Campaign Act (FECA) to enforce FECA.

Public financing is available for qualifying candidates for President during both the primaries and the general election. Eligibility requirements must be fulfilled to qualify for a government subsidy and those that do accept government funding are usually subject to spending limits. The system is designed so that the Democratic or Republican candidates for President of the United States routinely qualify for funds, while excluding most other party candidates.

Races for non-federal offices are governed by state and local law. Over half the states allow some level of corporate and union contributions. Some states have limits on contributions from individuals that are lower than the national limits, while five states have no limits at all.

Campaign finance is a controversial issue, pitting concerns about free speech against concerns about corruption and inequality on the part of those who favor existing or further restrictions.

[edit] Background to federal campaign finance reform

For most of the history of the United States, federal election campaigns were relatively unregulated.^{[citation needed]} Laws such as the Pendleton Act and the Hatch Act attempted to limit participation by government employees in funding campaigns. The Tillman Act and Federal Corrupt Practices Act sought to limit more broadly the influence of money on the campaigns, but these were largely ignored.^{[citation needed]}

After the Watergate affair, Congress took action to better regulate federal campaigns. Amendments to the Federal Election Campaign Act (FECA) in 1974 created an independent agency, the Federal Elections Commission (FEC), to monitor donations and spending on federal campaigns. FECA also placed limits on campaign contributions and expenditures, the latter of which were invalidated on First Amendment grounds in the Supreme Court decision of Buckley v Valeo. In 2002, Congress further attempted to reform federal campaign finance reform with the Bipartisan Campaign Reform Act. This law was also challenged in the Supreme Court, but its core provisions, including restrictions on "soft money" donations to political parties and restrictions on "electioneering communications" (broadcast ads mentioning a candidate within 30 days of a primary or 60 days of a general election) were upheld by the Supreme Court in McConnell v. Federal Election Commission.

[edit] Hard money and soft money

Political money in the United States is often divided into two categories, "hard" money and "soft" money.

"Hard" money is contributed directly to a candidate or to a political party. It is regulated by law in both source and amount, and monitored by the Federal Election Commission.^{[citation needed]}

Historically, "soft money" referred to contributions made to political parties for purposes of party building and other activities not directly related to the election of specific candidates.^{[citation needed]} Because these contributions were not used for specific candidate advocacy, they were not regulated by the Federal Election Campaign Act, as interpreted by the Supreme Court in Buckley v. Valeo.^{[citation needed]} The Bipartisan Campaign Reform Act of 2002 (also known as McCain-Feingold) prohibited unregulated contributions to national party committees.^{[citation needed]} "Soft money" also refers to unlimited contributions to organizations and committees other than candidate campaigns and political parties (except, where legal, to state and local parties for use solely in state and local races).^{[citation needed]} Organizations which receive "Soft money" contributions are often called "527s", for the section of the tax code under which they operate. Such organizations can legally engage in political activity, but funds from "soft money" contributions may not be spent on ads promoting the election or defeat of a specific candidate.

The U.S. Supreme Court decision Buckley v. Valeo (1976) held that limitations on donations to candidates were constitutional (because of the compelling state interest in preventing corruption or the appearance of corruption), but limitations on the amount campaigns could spend (spending limits or caps) were an unconstitutional abridgment of free speech under the First Amendment. Buckley v. Valeo also held that only speech that expressly advocated the election or defeat of a candidate could be regulated. Thus organizations could spend unregulated "soft money" for a variety of activities, including "issue advertising," a broad term that included any advertising that stopped short of expressly advocating the election or defeat of a candidate through words and phrases such as "vote for," "vote against," "support," "defeat," or "elect".

Beginning in the late 1970s, parties successfully petitioned the Federal Election Commission to be allowed to spend soft money on non-federal party building and administrative costs.^{[citation needed]} Soon, this use of soft money expanded to voter registration, get out the vote, and issue advertising.^{[citation needed]} For example, a wealthy individual could give a large contribution in soft money to a political party. The party could then spend this money on political ads. These ads could not explicitly or expressly advocate the election or defeat of a candidate (such as "Vote for Smith," "Elect Smith," "Send Smith to Congress," "Vote Against Jones," or "Defeat Jones"), but they could use the names of candidates ("John Smith is an honest man who stands up for the people; Bill Jones is a chronic liar who's taken money from special interests and advocated cutting Social Security. Call Bill Jones and tell him how you feel about this."^{[citation needed]})

The Reform Party, founded by Ross Perot, made campaign finance reform a central issue in its platform,^{[citation needed]} and when Perot ran for president in 1992 and 1996 he strongly argued for it.^{[citation needed]} Oddly enough, most political scientists believe that campaign finance laws hindered Perot's efforts to establish the Reform Party on a permanent basis.^{[citation needed]} It again became a major issue in the 2000 U.S. presidential election, especially with candidates John McCain and Ralph Nader.^{[citation needed]} Organizations in favor of campaign finance reform included many public interest groups, such as Common Cause, Democracy 21, the Campaign Legal Center, and Democracy Matters.^{[citation needed]} Opposition came from a coalition of organizations such as the American Civil Liberties Union and the Center for Competitive Politics (both of which argue that campaign finance reform would harm free speech) and the National Rifle Association, National Right to Life Committee, and other grassroots organizations.^{[citation needed]}

The Bipartisan Campaign Reform Act of 2002, sometimes called McCain-Feingold, amended the Federal Election Campaign Act (1971) to ban national political party committees (most prominently the Democratic National Committee and Republican National Committee) from accepting or spending soft money contributions.^{[citation needed]} It also included a "stand by your ad" provision requiring candidates to appear in campaign advertisements and claim responsibility for the ad (most commonly with a phrase similar to "I'm John Smith and I approve this message.")^{[citation needed]}

The legislation was challenged in McConnell v. Federal Election Commission (2003), but most of the act was upheld by the Supreme Court. However, a further challenge in Federal Election Commission v. Wisconsin Right to Life, Inc. (2007), with new justices on the Supreme Court, resulted in parts of McConnell being effectively, though not formally, reversed.

After the passage of the Bipartisan Campaign Reform Act, many of the soft money-funded activities previously undertaken by political parties were taken over by various 527 groups, which funded many issue ads in the 2004 presidential election.^{[citation needed]} In 2006 the Campaign Finance Institute issued a study on 527 groups. The study shows that many advocacy groups deploy three different types of organization—political action committees (PACs), 527 groups, and 501(c) advocacy entities—in their efforts to influence federal elections and public policy.^{[citation needed]} These cumulative, coordinated efforts increase the groups' financial influence in elections.^{[citation needed]} The CFI analysis presents much new information about the major role played by 501(c)(4) social welfare, (c)(5) labor union and (c)(6) trade association organizations in elections, and the different ways in which they and related 527 organizations are used by Republican and Democratic-oriented groups.^[1].

[edit] Bundling

Another consequence of the limitation upon personal contributions from any one individual ($2300 for each election, with a total of $4600 for a primary and general election as of 2007^{[citation needed]}) is that campaigns seek out "bundlers," people who can gather contributions from many individuals in an organization or community, and present the sum to the campaign.^{[citation needed]} Campaigns often recognize these bundlers with honorary titles and, in some cases, exclusive events featuring the candidate.^{[citation needed]}

Bundling has always existed in various forms,^{[citation needed]} but has become more important with the enactment of limits on contributions at the federal level and in most states in the 1970s. EMILY's List, for example, was involved in early bundling-like activities.^[2] Bundlers grew in importance again after the Bipartisan Campaign Reform Act of 2002 prohibited soft money contributions to political parties.^[3]

Bundling became organized in a more structured way in the 2000s, spearheaded by the "Bush Pioneers" for George W. Bush's 2000 and 2004 presidential campaigns.^{[citation needed]} One infamous former "bundler" was Democratic Party supporter and apparel manufacturer Norman Hsu, who achieved a prominent role as one of Hillary Rodham Clinton's "HillRaisers" for her 2008 presidential campaign.^[3] Hsu was then found to be a fugitive from an early 1990s fraud charge; in such cases, campaigns usually return or donate to charity the contributions that the person in question gave,^{[citation needed]} but are left with the thorny question of whether to return all the other contributions that bundler gave. In some cases, including Hsu's, bundlers are suspected of having donated their own money under others' names (to circumvent the individual contribution limit) or of having coerced employees or others to make contributions with their own money,^{[citation needed]} both of which are illegal. But most bundlers operate legally and help to reduce the time and cost of fundraising for the candidates and their campaigns.^{[citation needed]}

During the 2008 campaign the six leading primary candidates (three Democratic, three Republican) had listed a total of nearly two thousand bundlers.^[3]

[edit] Current provisions of federal campaign finance laws

[edit] Disclosure

Current campaign finance law at the federal level requires candidate committees, party committees and PACs to file periodic reports disclosing the money they raise and spend.^{[citation needed]} Federal candidate committees must identify, for example, all PACs and party committees that give them contributions, and they must provide the names, occupations, employers and addresses of all individuals who give them more than $200 in an election cycle.^{[citation needed]} Additionally, they must disclose expenditures to any individual or vendor.^{[citation needed]} The Federal Election Commission maintains this database and publishes the information about campaigns and donors on its web site.^{[citation needed]}

Similar reporting requirements exist in many states for state and local candidates and for PACs and party committees.^{[citation needed]}

Increasingly, political committees on all levels are required to electronically file campaign finance statements.^{[citation needed]}

Most political advertising, including all advertising that specifically advocates the election or defeat of a candidate for federal office, is required to identify the source of its funding.^{[citation needed]} In elections for national office (Congress and president/vice-president), television ads from a candidate must feature a shot of the candidate's face and have the candidate personally identify himself/herself, saying, "I approved this message."^{[citation needed]} The Bipartisan Campaign Reform Act added this rule in the belief^{[citation needed]} that candidates would not engage in negative campaign advertising if they had to personally claim responsibility for the ad's content. As of 2007, little empirical research has been done on its effects, but no one has reported a noticeable effect on the tone of campaigning.^{[citation needed]}

[edit] Independent Expenditures

The Supreme Court's ruling in Buckley v. Valeo (1976) held that expenditures made independently of a candidate's campaign could not be limited under the Constitution. If expenditures are made in "coordination" with a campaign, however, they may be regulated as contributions.

[edit] Corporate and Union Activity

Even though corporations and labor organizations may not make contributions or expenditures in connection with federal elections, they may establish Political Action Committees, or PACs.^{[citation needed]} Corporate and labor PACs raise voluntary contributions from a restricted class of individuals.^{[citation needed]} In the case of unions, this consists of union members and their families.^{[citation needed]} For corporations, the restricted class consists of managerial employees and stockholders and their families.^{[citation needed]} These funds may be used to support federal candidates and political committees, either through independent expenditures or through contributions to candidates.^{[citation needed]} A PAC is limited to a maximum contribution of $5000 to a candidate committee.^{[citation needed]}

Although prohibited from using their resources to "expressly advocate" the election or defeat of federal candidates, or to make contributions directly to candidates or parties, corporations and labor organizations may conduct a variety of activities related to federal elections, in addition to those conducted through a PAC.^{[citation needed]} Though they may not use general treasury funds to pay for "electioneering communications" - broadcast ads referring to candidates for federal election without expressly advocating their election or defeat – in the 60 days prior to a general election, or 30 days prior to a primary election, they may advocate for political issues and mention federal candidates while doing so, if outside the 30/60 day time frame for "electioneering communications," or at any time through non-broadcast media.^{[citation needed]} They may also engage in certain non-partisan voter registration and get-out-the-vote campaigns.^{[citation needed]}

Additionally, over half the states allow some level of direct corporate contributions or spending in state and local races.^{[citation needed]}

[edit] Political Party Activity

Political parties are active in federal elections at the local, state and national levels. Most party committees organized at the state and national levels as well as some committees organized at the local level are required to register with the FEC and file reports disclosing their federal campaign activities.^{[citation needed]}

Party committees may contribute funds directly to candidates, subject to the contribution limits.^{[citation needed]} National and state party committees may make additional "coordinated expenditures," subject to limits, to help their nominees in general elections.^{[citation needed]} National party committees may also make unlimited "independent expenditures" to support or oppose federal candidates.^{[citation needed]} However, since 2002, national parties have been prohibited from accepting any funds outside the limits established for elections in the Federal Election Campaign Act. State party and local committees are also subject to restrictions on the funds they may spend in connection with an election in which a federal candidate is on the ballot.^{[citation needed]}

Party committees must report with the FEC once their federal election activities exceed certain dollar thresholds specified in the law.^{[citation needed]}

[edit] Table of Federal Donation Limits

Table Footnotes