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The role of campaign finance

Presidential candidates receive funding from both private donors and the federal government, while congressional candidates rely solely on private sources. The federal government matches contributions from individual donors who give $250 or less, dollar for dollar. To qualify for these funds, candidates must raise $5,000 from small contributors in 20 different states. In the past, each political party received a one-time grant to help cover the costs of their nominating conventions, but this program ended in 2014 when President Obama signed new legislation. During the general election, the government covers all costs, up to a certain limit, for major-party candidates and partially subsidizes expenses for minor-party candidates who receive between 5 and 25 percent of the vote.

This public funding system for presidential elections was introduced after the Watergate scandal in the 1976 election. However, in recent years, an increasing number of candidates have chosen not to participate in this program. By opting out, candidates can spend unlimited amounts of money, while those who accept public funds must follow spending caps. In 2000, George W. Bush was the first to opt out of public funding during the primaries, although he participated in the general election funding. Barack Obama was the first to forgo public funding entirely during the general election in 2008, and in 2012, both major party candidates opted out of public funding. In 2016, only Martin O’Malley, a former governor of Maryland running for the Democratic nomination, accepted public financing; all other candidates, including Clinton and Trump, rejected it. The future of this funding system is uncertain.

Congressional candidates do not receive any government funding and must raise all their money from individuals, interest groups, or political parties. Contrary to popular belief, the majority of campaign funds come from individual donors, not wealthy individuals. Due to strict limits on how much one person can donate directly to candidates, most contributions are small, typically ranging from $100 to $200, from average citizens rather than a few affluent donors.

Campaign finance

Campaign finance refers to the funding of election campaigns. Expenditure can come from individuals, interest groups and businesses who are donating to campaigns, as well as the money spent by parties and candidates to try to ensure electoral victory. It can also include expenditure by other organisations (such as interest groups and corporations) that is not donated to a candidate but is spent, usually in the form of publicity, by that group to influence the outcome of elections.

In McCutcheon versus FEC 2014, the Supreme Court struck down limits on individual campaign contributions, ruling that federal limits on combined donations to candidates, parties and political action committees were an unconstitutional infringement on free speech. Chief Justice John Roberts ruled that Congress 'may not... regulate contributions simply to reduce the amount of money in politics, or to restrict the political participation of some in order to enhance the relative influence of others'.

Where campaign finance goes

Campaign donations can go to three different places:

- - national parties
· presidential candidates
· Super PACs.

There have been major concerns over the role of money in US elections. The three main concerns are:

· excessive influence of major donors

· secrecy surrounding who is donating and receiving cash

· inequality of expenditure between candidates or parties.

Various laws called 'campaign finance regulations' have been passed to regulate money in elections. The two major regulations on presidential elections are the Federal Election Campaign Act (1974) and The Bipartisan Campaign Reform Act (known also by its sponsors, The McCain Feingold Act) 2002. This was followed by the Citizens United versus Federal Election Commission ruling in 2010.

FECA: the Federal Election Campaign Act (1974)

Under the new law, individuals could not contribute more than $1,000 to a candidate during any single election. Corporations and labor unions had for many decades been prohibited from spending money on campaigns, but the new law created a substitute: political action committees (PACs). A PAC must have at least 50 members (all of whom enroll voluntarily), give to at least five federal candidates, and must not give more than $5,000 to any candidate in any election or more than $15,000 per year to any given national party committee. The law allowed federal tax funds to support presidential primary campaigns. It covered all the campaign expenses for major-party candidates and a portion of costs for minor-party candidates in the general election. However, many candidates have recently chosen to opt out of this funding system. The new legislation resulted in increased spending on elections and altered how that money was utilized over time. Since the 1970s, various types of Political Action Committees (PACs) have emerged or declined. Each election cycle since 2002, PACs have contributed over $250 million to congressional candidates. According to the Federal Election Commission's report on the 2015–2016 federal election cycle, 8,666 federal PACs raised nearly $4 billion and spent about that same amount on elections. This included significant contributions from corporate PACs ($385 million), labor PACs ($331 million), and super PACs, which are formally known as "Independent Expenditure Only Political Committees," totaling $1.8 billion in expenditures. The details of super PACs will be discussed further below.

The 1973 campaign finance law created two main issues. The first was independent expenditures. PACs, corporations, or labor unions could spend unlimited amounts supporting or opposing a candidate, as long as this spending was “independent” and not coordinated with the candidate's campaign. Independent expenditures essentially refer to regular advertisements that target candidates.

The second issue arose from soft money. The law permitted individuals, corporations, labor unions, and other groups to donate unlimited sums to political parties, provided that the contributions did not directly support specific candidates. Nonetheless, these funds could be used to promote candidates indirectly, such as by financing voter registration drives. Many viewed these activities as indirect spending on candidates because, for instance, an advertisement could showcase a candidate’s image and encourage voting for their party without mentioning the candidate by name, allowing it to be funded with soft money. This made such practices controversial.

This law was introduced to regulate money in elections.

Main impacts of FECA

· Places legal limits on campaign contributions — a private individual can only donate $2,700 and a group can only donate $5,000 to an individual candidate.

· Creates a maximum expenditure limit for each candidate in the presidential election.

· Requires candidates to disclose sources of campaign contributions and campaign expenditure.

· Created federal funding of presidential and primary elections, which works on a matching funds basis (for every dollar a candidate raises, they are given a dollar by the federal government). To qualify, a party must receive 5 per cent or more of the vote in the previous election.

· Created Political Action Committees. A PAC has to be created by any group wanting to donate money to a campaign. Businesses and interest groups create a PAC that is legally registered with the Federal Election Commission (FEC), a six-member bipartisan committee to oversee finance rules.

The law had many flaws, which severely reduced the effectiveness of the regulations.

· Soft money

Soft money is money donated (by interest groups or individuals) or spent (by parties or candidates) that could not be regulated under the law. Loopholes allowed for continued donations or spending without regulations. Business or interest groups spend money on campaign advertising for or against a candidate, without directly donating money to a candidate's campaign, for example.

· Supreme Court

Various Supreme Court rulings, often based on the 1st amendment, undermined legislation, making it harder to restrict donations and expenditure. For example, the restrictions cover funding of candidates, but not funding of parties. A party can spend money supposedly for the purposes of party building and voter education, but in fact use this to support a candidate. The Supreme Court also decided that the candidate's own money was exempt from restrictions.

· The end of federal funding

Candidates became increasingly effective at raising money. In 2000 George W. Bush raised more than the campaign limit (approximately $120 million) without using federal funds. By rejecting federal funds he was not constrained by campaign expenditure limits. This made it much harder for Al Gore, who took matching funds, to compete. In 2004 Bush repeated the feat against Kerry, who took matching funds. 2012 was the first election when neither candidate accepted matching funds; this was repeated in 2016.

Bipartisan Campaign Reform Act 2002

Following the 2000 election, Congress initiated a significant movement aimed at reforming the campaign laws established in the 1970s. This effort resulted in the Bipartisan Campaign Reform Act of 2002, which gained swift approval from both the House and Senate and was signed into law by President Bush. The Supreme Court case Buckley v. Valeo (1976) had previously upheld federal limits on campaign contributions while also recognizing that spending money to influence elections is a protected right under free speech. This meant candidates could contribute unlimited amounts to their own campaigns. While that ruling remained largely intact, the new law introduced three key changes.

First, it prohibited soft-money contributions from corporations and unions to national political parties. After the 2002 federal elections, national parties and their committees could no longer accept soft money. Instead, they could only receive "hard money," which comes from individual donations or PAC contributions subject to federal limits. Many worried that this would significantly weaken political parties, which had become reliant on soft-money donations. However, as previously discussed, parties adapted their strategies and began to raise more funds than before.

Second, the maximum individual contribution limit increased from $1,000 per candidate per election to $2,000, with adjustments for inflation; for the 2017-2018 election cycle, this limit was set at $2,700.

Third, the law imposed strict restrictions on independent expenditures by corporations, labor unions, trade associations, and, under certain conditions, nonprofit organizations. These entities are now barred from using their own funds to refer to a clearly identified federal candidate in advertisements during the 60 days leading up to a general election or the 30 days before a primary. PACs may still mention candidates in their ads, but they are also limited to hard money contributions as defined by federal law.

Soon after the law was enacted, critics launched a federal lawsuit claiming it was unconstitutional. This lawsuit united various groups, including the American Civil Liberties Union and the National Right to Life Committee, which typically do not collaborate. They argued that the restrictions on independent spending referencing identified candidates within the 60 days before an election infringe on free speech rights. According to the law, an organization can be penalized simply for mentioning a politician, even without endorsing or opposing them. For example, they cannot state their position on a bill introduced by Congresswoman Pelosi during this timeframe.

Print and broadcast media are exempt from this law, allowing them to express whatever views they wish about candidates. This shift in regulations redirects influence from businesses and unions toward the media.

In the case of McConnell v. Federal Election Commission (2002), the Supreme Court upheld nearly all aspects of the new law. The Court dismissed arguments claiming that financial resources equate to free speech and ruled that restricting corporations and unions from mentioning federal candidates in the 60 days leading to an election did not violate the First Amendment. However, in 2007, the Court shifted its stance. A right-to-life group's advertisement urged the public to contact Senator Russell Feingold regarding specific judicial nominees without indicating how to vote.

The Court ruled that the activity in question was considered "issue advocacy," which is protected by the First Amendment, and therefore could not be prohibited by the McCain-Feingold law, as established in Federal Election Commission v. Wisconsin Right to Life. In two subsequent rulings, campaign finance regulations were further loosened. In the 2010 Citizens United case, the Court narrowly decided, with a five-to-four vote, to overturn the prohibition on campaign advertisements funded by corporations and unions. While it maintained limits on contributions to candidates, this decision allowed corporations, unions, and other organizations to spend unlimited amounts of money to promote or oppose specific candidates, contributing to the rise of super PACs. In 2014, the ruling in McCutcheon v. Federal Election Commission removed the total biennial limits on individual contributions to national parties and candidates. Previously, individuals could only donate a maximum of $48,600 overall to candidates and $2,600 to any single candidate, allowing contributions to only 18 candidates at the federal limit. Although McCutcheon upheld individual contribution limits per candidate, it eliminated the overall contribution cap. Now, an individual can contribute the federal maximum of $2,700 (for the 2017-2018 cycle) to as many candidates as they wish, mirroring similar decisions for political parties. Historically, changes like these, along with the current complex legal landscape, are unlikely to hinder individuals, PACs, party leaders, and others from financially supporting their preferred candidates. Additionally, it is expected that various groups will continue to direct their contributions in ways that align with their interests.

Political Action Committees (PACs) that focus on a specific party, policy, or cause usually maintain consistent giving patterns regardless of which party is in power. For example, pro-choice PACs support Democrats, while pro-life PACs back Republicans. In contrast, trade and corporate PACs often adjust their contributions based on who is in charge. When Democrats lead Congress, trade organizations typically contribute to them. However, when Republicans take control, these PACs redirect their funds to Republicans. During the 2009–2010 cycle, the National Association of Realtors allocated 55 percent of its donations to Democrats. Once Republicans regained the House in 2010, their contributions shifted to 55 percent for Republicans in 2011–2012. Likewise, the National Beer Wholesalers Association donated 53 percent to Democrats in 2009–2010 and then increased their support to 59 percent for Republicans in 2011–2012. This pattern is evident with many other trade and corporate PACs as well. As will be explored in the next chapter, the primary aim of many PACs is to establish connections with politicians and build relationships, rather than to champion a specific ideology. As a result, they tend to favor the party that holds power.

· banned soft-money donations to national parties (all money raised or spent was now subject to federal limits)

· said that soft-money donations to local parties could not be used to support federal candidates, but only for genuine party-building activities

· said that issue adverts could not be funded directly by unions or corporations

· said that issue adverts mentioning a candidate's name could not be shown within 60 days of an election, or 30 days of a primary, unless approved by one of the candidates, with money spent being covered by spending regulations.

Difficulty in achieving effective reform

Campaign finance laws have had limited effectiveness for a variety of reasons. In addition, it has proven difficult to overcome these limitations:

· the ability of groups to find loopholes (soft money) the 1st amendment and the ideological balance of the Supreme Court in striking down key provisions

· the lack of legislation on the issue, which occurs both because it is difficult to pass legislation

through Congress and perhaps due to unwillingness for politicians to regulate themselves

· the difficulty in amending the Constitution to regulate elections, such as Sanders's failed `Democracy for all' amendment.

Super PACs PACs and Super PACs

The Bipartisan Campaign Reform Act 2002 was dealt a major blow with the Citizens United versus Federal Election Commission ruling in 2010, which struck down key parts of the legislation. The 5-4 ruling declared that the BCRA infringed 1st amendment rights.

This gave rise to new organisations set up solely to influence electoral outcomes without directly working with or donating to a candidate. These 'Super PACs' raise funds from individual and group donors and spend this mainly on campaign advertising, without any campaign finance restrictions. Super PACs are typically created to support a particular presidential candidate.

Since the 2010 mid-term congressional elections, campaigns have been dominated by these organisations. Opensecrets.org reported that by 2016 there were 2,398 Super PACS, raising over $1.5 billion during that year's elections.

Right to Rise was actually created by Jeb Bush, who raised funds for it until he declared his candidacy, when control was passed to Mike Murphy, a former political adviser to Mitt Romney. The Super PAC was also criticised for focusing negative advertisements mainly on the perceived main rival, Marco Rubio, rather than on now-President Donald Trump.

There remains considerable debate over the extent to which US elections hold politicians to account. This has led to the passage of a number of reforms which have attempted to restrict funding or make the system fairer. The system of generating campaign finance, which tends to benefit incumbents or wealthy individuals, as well as the increasing cost of electoral campaigns, has led to calls for greater restrictions on campaign finance. The problem has been in securing reform which strikes a balance between creating a fair playing field and not impinging on democratic rights to freedom of expression.

Despite these reforms, the cost of elections continues to escalate, with the Centre for Responsive Politics estimating that over $2.6 billion was spent on the 2012 elections.

Money plays a crucial role in politics, and attempts to eliminate it are unlikely to succeed. The Bipartisan Campaign Reform Act, when put into action, prompted people to seek alternative ways to fund political activities. One popular option became 527 organizations, named after a section of the Internal Revenue Code. These groups allow for soft-money expenditures that political parties once made. In 2004, the Democratic Party established entities like the Media Fund and America Votes, among others. Wealthy donor George Soros contributed over $23 million to various organizations aimed at defeating George W. Bush. In response, Republicans formed groups such as Progress for America and America for Job Security. Currently, 527 organizations can spend money on political activities as long as they don't coordinate with specific candidates or lobby on their behalf. In the 2004 elections alone, these groups raised and spent more than $300 million.

In recent years, two other types of organizations have emerged alongside 527 groups. The first is super PACs, or "independent expenditure-only political committees." These super PACs came into existence following the Citizens United ruling and other related changes. Unlike traditional PACs, which face strict limits on contributions, super PACs can raise and spend unlimited amounts from corporations, labor unions, individuals, and other entities. However, they must operate independently from candidates and their campaigns, meaning they can’t coordinate with them in any manner. For instance, a super PAC must independently fund and create any television advertisements for a candidate without involvement from that candidate or their campaign staff. This independence has made super PACs significant sources of campaign funding in recent elections. In 2014, 1,322 super PACs raised over $695 million and spent about $348 million, according to the Center for Responsive Politics.

In the 2014 election, the combined spending by the Democratic Congressional Campaign Committee and the National Republican Congressional Committee was $134 million, which is less than 40 percent of what super PACs spent. During the 2015–2016 election cycle, the Federal Election Commission reported that 2,722 super PACs raised and spent $1.8 billion, outpacing the fundraising of presidential candidates and parties. Additionally, 501(c)4 groups, known as social welfare organizations, have become significant contributors to political funding. These groups, named for the section of the tax code that governs them, focus on promoting social welfare and have been around for many years. They include various community organizations, such as civic leagues and local volunteer fire departments, as well as well-known entities like the Sierra Club, AARP, and the National Rifle Association. While these groups can participate in politics, they must ensure that political activities account for no more than 50 percent of their spending. Unlike super PACs, which are required to disclose their donors, 501(c)4 groups do not have to reveal their funding sources. This lack of transparency has led to the term "dark money" being used to describe them. Spending by these 501(c)4 groups has significantly increased, rising from about $5 million in 2006 to over $300 million in 2012, although the long-term effects of this spending are still uncertain.

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