Thursday, May 6, 2010

Mo' Money, Mo' Problems ...

The Notorious B.I.G. knew what he was talking about when said, the mo' money we come across, the mo' problems we see. Pretty prophetic for a man with other hits such as "Junior Mafia" and "Big Booty Hoes." Anyway, there is truth in that adage. Money works strange magic upon unsuspecting citizens. Another famous song croons, "... but it's hard to find, one rich man in ten ... with a satisfied mind." Is money bad, per se? No. However, the argument could be made that in politics, money can have a devastatingly harmful effect. This blog refers to the large amounts of money spent on federal campaign finance in the United States.

Candidates for federal offices may accept donations to their campaigns from both individuals and interest groups, but there are a slew of regulations from two major pieces of legislation -- the Federal Election Campaign Act (1971) and the Bipartisan Campaign Reform Act (also known as the McCain-Feingold bill). These pieces of legislation provide limits on what individuals and groups could donate to a campaign and also attempted to limit the dollar amounts a candidate could spend of their own money on a campaign. Critics of the legislation argued campaign contributions and spending were linked to political free speech, and thus, protected from government regulation. These limitations were challenged in the case Buckley v. Valeo (1976). In this case, the Supreme Court held that limitations on the donations to campaigns were not a first amendment violations because the interest of maintaining a fair democratic election was paramount. But, the Court did note that a candidate could spend as much of their person money on a campaign as they desired.

Government regulations also have provided that labor unions and corporations could not directly donate to campaigns. To somewhat circumvent this, groups such as these formed what have become known as political action committees, which are groups legally entitled to raise money and support various candidates. These PACs can donate up to $5,000 (per election cycle) to any candidate and can support as many candidates as they like. They may also donate up to $15,000 to a national party committee annually.

Individual donations are also limited. Currently, the figure stands at $2,400 that can be given to a campaign (per election cycle) and a person may support as many candidates as he or she wishes. They may also donate up to $30,500 to a national party committee annually. The numbers for individual contributions are adjusted every two years to make up for any inflation/cost of living changes.

Most Americans would look at these numbers and say, "what's the big deal?" These dollar figures add up quickly. Thankfully, part of government regulations require "transparency," which means candidates have to report donations from PACs and individual donors. Two websites that are wonderful in keeping these figures include the Federal Election Commission's website and the independent site Open Secrets. Looking at presidential elections from 2008, candidates in the general election alone topped over $1,000,000,000 in funds they raised at spent from PACs and donors.

In the presidential race, most candidates shy away from PAC money because they like to claim they aren't "owned by any special interest." In federal races for the House and Senate, however, PAC money is a significant source of campaign revenue. In Senate races, PAC money tends to make up about one quarter of funds raised, while in the House, the number trends toward representing about one half or more of the candidates source of cash. A more interesting fact that could be explored later is how PAC money is distributed with regard to party affiliation.

Are our candidates being "bought?" Probably not by PAC money. Candidates likely would only take money from PACs they already agree with or represent some non-controversial policy area. Yet, candidates for federal offices can exploit other loopholes in campaign finance law through what are referred to as "independent expenditures."

Independent expenditures are forms of unlimited moneys spent on candidates that are not directly affiliated or connected with the candidate or the campaign. For example, if I wanted to spent $100,000 on t-shirts, buttons, stickers, etc. promoting Candidate A, that's perfectly legitimate. Candidate A did not ask me for help and may not even know I was doing his work on his behalf. Groups may also make independent expenditures and this makes for a significant problem. In recent campaigns, mostly presidential, groups known as "527s" (the name stems from being organized under section 527 of the tax code) spend large sums of money on behalf of candidates, so long as they do not become directly connected with the campaign.

In the 2010 election cycle (which is an mid-term election year), 527s have already spent millions promoting the candidates of their choice. American Solutions Winning the Future, a conservative group hoping to make Congressional gains this November, is currently the leader in donations/spending, nearing $20 million for this cycle alone. Imagine what a presidential election might yield. Oh wait, no need to imagine -- the figures are available. In the 2004 election cycles, 527 groups combined pumped more than $600 million into elections. Not much had changed in 2008, with the number at almost $500 million. This figure doesn't represent the individual donations (which are substantial) and PAC money.

A large percentage of both Senator John McCain's and President Barack Obama's expenditures (33.4% and 56.3%, respectively) went towards media expenses. Combined, the two spent more than $500 million on various forms of media (much of which was negative). Additionally, many groups made independent expenditures both for and against these two candidates. Groups spent more than a combined $70 million to oppose President Obama! McCain's number of dollars opposing him was significantly lower, but still a substantial $10 million.

What does all this mean? First, elections are ridiculously expensive, particularly for president. Second, I believe the attempts by the government to curtail the role of money in elections has proved largely ineffective and marginalizes the donations of an individual. Groups have become very adept at skirting around the limits of the law and some type of action needs to be taken. Independent expenditures need to be closely monitored and the very existence of 527 groups appears to defeat the entire purpose of having campaign regulations at all.

Unfortunately, the Supreme Court has inadvertently made the problem worse. In their recent decision of Citizens United v. FEC, the Court maintained that corporations and unions could not use their funds to directly contribute to campaigns, however they could use funds for independent expenditures, which they previously had not been allowed to do. The Court saw unions and corporations as having first amendment rights to political speech (in the form of money) even though they were not individual citizens. This decision, in effect, allows more "interested money" into the politics of our nation.

Money cannot be a driving force in determining the outcome of elections. Politicians even recognize this -- as former Senator Phil Gramm once noted, the best friend in American politics is "ready money." The propensity for an unfair advantage to one political party or candidate has been obvious and was the motivating factor in the major pieces of legislation, such as the recent Bipartisan Campaign Reform Act. When the principle of fair elections collides with "political free speech," the fairness of the electoral process must supersede free speech. Fair, competitive elections are one of the bedrock principles of a democratic society, and thus more important than free speech, which is limited in multiple ways. This situation should be another exception to the rule.

Despite the best efforts of government, groups have found and possibly will continue to find loopholes in the system. Paul Gigot, of the Wall Street Journal, stated, "Purging money from politics is like trying to stop water rushing downhill. Dam one stream and another quickly forms." And so the cat and mouse game continues. Today's political climate with regard to campaign finance is an overlooked area where citizens desperately need to be aware of the dollars spent by candidates and where that funding comes from. I urge you to visit and see what your local representatives are up to. This site also allows visitors to examine the top donors to candidates (groups and individuals), their spending habits, independent expenditures and a host of other important financial statistics.


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  2. The Citizens United case is one of the most disasterous SCOTUS decisions ever made -beating out Bush v. Gore 2000. Until we get rid of this ridiculous notion that corporations (and to a *much* lesser degree, unions) are *cough* individuals who demand "free speech" rights but also the fruits of limited liability and unlimited wealth, we are doomed.