Campaign Finance Reform: A Necessary Change


Executive Summary

Campaign finance reform is the effort to change the power and effect that money has on United States politics, particularly elections. The current sanctions and regulations placed on groups or individuals who donate money to certain parties or candidates are not thorough enough. Campaign finance law is often thought about as loopholes rather than laws. Candidates and supporters find different loopholes in order to pour money into different sectors to influence politicians.  Although it is difficult to stop people from donating money where they please because of their first amendment rights, there needs to be a governmental change in order to overcome this misrepresentation of the American people. More power needs to be given to the Federal Election Committee and the right people need to be selected to run the FEC. Campaigns need to be run mostly by publicly funded money so that the American people are actually represented in Congress.

Introduction

Whether it is the presidential, congressional or judicial elections the story seems to be the same no matter what sector of government is involved; there is a need for a change in the way that campaigns are funded/financed. Politicians nation-wide spend far too much time soliciting, even begging for campaign contributions from special interest groups, well-heeled individuals, as well as lobbyists and the constituents they represent instead of trying to solve the numerous problems that face our nation and world. The high cost of running a serious campaign shrinks the pool of individuals willing to become candidates to those with personal wealth or those with the ability and resources to nonstop fundraise. Since money essentially equals a voice, those with money have a disproportionate influence. There is also a real potential for conflict of interests that results when candidates receive contributions from individuals or organizations with interests directly related to those pending in congress (Mann).  Change will require cooperation and buy-in from all stakeholders: the electorate, government and the business community all need to recognize and accept that our current way of running elections is imperfect and something needs to be done. But, most importantly, there must be changes in how Congress approaches elections and the way that Federal Election Committee is run. This paper will show that the government needs to make regulation changes and put more power into the hands of the people running the Federal Election Committee.

The Issue

Democracy means the representation of the people. “Democracy is a form of government in which all eligible citizens participate equally—either directly or through elected representatives” (Wikipedia). The citizens elect entrusted leaders with the expectation that they will serve the best interests of society. Therefore our best chance of governing ourselves, being represented, is by having the best judgment in who we elect. Yet, corruption and the power that money plays in our political elections are undermining our sacred democratic system (Wertheimer, 1126). People and organizations can provide large sums of money to the elected officials who make decisions for society (check figure 2 to see the most recent presidential election finance numbers). “Under present law, an individual may contribute $1,000 per election to a candidate, or $2,000 for a primary and general election, $5,000 to a PAC, and $20,000 to a national political party. Individuals thus may give an annual total of up to $25,000 to affect federal elections, a figure that includes all contributions to individual candidates and party committees” (Wertheimer, 1155). Politicians become indebted to these donors and therefore  may compromise their political ideologies, and their best judgment in representing the people who elected them. Former Senator Barry Goldwater wrote in the 1980’s, “The fact that liberty depended on honest elections was of the utmost importance to the patriots who founded our nation and wrote the constitution. To be successful, representative government assumes that elections will be controlled by the citizenry at large, not by those who give the most money. Electors must believe their vote counts. Elected officials must owe their allegiance to the people not to their own wealth or to the wealth of interest groups who speak only for the selfish fringes of the whole community (Wertheimer, 1127). In my research I have come across countless articles, journals, podcasts etc.., that highlight the problems with our current system. Unfortunately, proposed solutions to our problem are far less abundant. But, as always, there is hope for a brighter more representative future.

Judicial Campaign Races

The potential for campaign finance corruption does not just exist in Federal and Congressional elections but also in our judicial system. “Candidates in state supreme court races raised around $211 million from 2000 to 2009—two and a half times more than in the previous decade. But the 2012 elections saw spending records shattered…This flood of campaign cash came from corporations, lawyers, and others with a stake in how these courts rule” (Corriher). This report from American Progress states that currently only 5 states require recusal when campaign contributions reach a certain number. I believe that there needs to be a federal law passed that specifies when recusal is required to ensure that the public can be confident that in judicial impartiality will prevail. By starting with our judicial systems we can assure that whenever a law comes into question, the people who make the decisions will be independent of any special interests and represent the best interests of the people.

History of Federal Election Campaign Laws:

Before the Federal Election Campaign Act (FECA) was passed in 1971 there were two major pieces of legislation that sought to limit contributions to ensure that wealthy individuals and special interest groups did not have a disproportionate influence on Federal elections: control of campaign spending and requirement for public disclosure of campaign finances (Zardkoohi, 805). In 1906, President Theodore Roosevelt stated, “”I again recommend a law prohibiting all corporations from contributing to the campaign expenses of any party. Such a bill has already passed one House of Congress. Let individuals contribute as they desire; but let us prohibit in effective fashion all corporations from making contributions for any political purpose, directly or indirectly” (Tillman Act of 1907). He favored this approach even though he himself had been accused of accepting corporate contributions towards his campaign.  In 1907 the Tillman Act (sponsored by South Carolina senator Benjamin Tillman) became the first piece of legislation that prohibited corporations from making monetary contributions to national political campaigns. But, this act was not nearly a perfect solution. Although it did provide penalties, there was no enforcement, partly because there was nothing like the Federal Election Committee (which did not exist until 1971), the Tillman Act was simply a first step of many towards U.S. campaign finance reform.

In 1910, the Federal Corrupt Practices Act (Publicity Act) became the United States’ primary law that regulated campaign finance in federal elections until the FECA was passed in 1971 (Wikipedia). The Publicity Act was amended in both 1911 and 1925, but it essentially built upon the Tillman Act. It established campaign spending limits and extended the Act’s power to primary elections.

Later the Labor Management Relations Act of 1947, also known as the Taft-Hartley Act was passed even though President Truman vetoed it (Criminal Resource Manual 2413). The Act’s major effect was to restrict (it is still in effect today) the activities and power of labor unions. This is relevant to campaign reform in that it prohibited labor unions or corporations from spending money to influence federal elections, and prohibited labor unions from contributing to candidate campaigns. Other acts such as the Hatch Act and the Smith-Connally Act also sought to limit the influence of the wealthy on elections and regulate spending on campaigns.

But a much larger and more effective campaign finance law came in the form of the Federal Election Campaign Act (FECA) and Revenue Act of 1971. With FECA congress consolidated all of its previous attempts at regulating campaign finance. In 1974, the Act was amended and updated to essentially what it is today. Some of the highlights of the act are as follows: the FECA places a ceiling on how much money a candidate or his immediate family can contribute to a campaign, it requires that candidates and their political committees let the public know who gives them money and how they spend that money, it regulates the public funding of presidential elections and created the Federal Election Committee (Fleishman A, 835).  The Federal Election Committee (FEC) is an independent government agency whose duties “are to disclose campaign finance information, to enforce the provisions of the law such as the limits and prohibitions on contributions, and to oversee the public funding of Presidential elections” (About FEC). It is made up of 6 members appointed by the president and confirmed by the senate, no more than 3 of the members may be of the same political party and the commission needs at least 4 votes to pass any action. They also help enforce expenditures and limitations, and help prosecute violations of the FECA. Additionally, the 1974 amendments defined how a Political Action Committee (PAC) could operate. There is also a wide array of restrictions and limitations on how PAC’s can affiliate and contribute to candidates, ballot initiatives, and legislation (PAC, Wikipedia).

Finally, the most recent major piece of legislation that affects campaign finance is the Bipartisan Campaign Reform Act, or the McCein Feingold Act of 2002. The act addressed two major issues: “the increased role of soft money in campaign financing, by prohibiting national political party committees from raising or spending any funds not subject to federal limits, even for state and local races or issue discussion and the proliferation of issue advocacy ads, by defining as ‘electioneering communications’ broadcast ads that name a federal candidate within 30 days of a primary or caucus or 60 days of a general election, and prohibiting any such ad paid for by a corporation (including non-profit issue organizations such as Right to Life or the Environmental Defense Fund) or paid for by an unincorporated entity using any corporate or union general treasury funds. The January 2010 decision in Citizens United v. Federal Election Commission overturns this provision, but not the ban on foreign corporations or foreign nationals in decisions regarding political spending” (McCain Feingold Goes to Court, 1). Yet, despite all of these acts and amendments, campaign finance reform is still a hotly debated and controversial issue without a satisfactory resolution.

Soft vs. Hard Money

Many of these acts draw lines between soft and hard money and the acceptance or limits of each. Previous to writing this paper I did not know the difference between hard and soft money in politics. Simply put, “hard money” is political donations that are regulated by law through the Federal Election Commission. Whereas “soft money” is money donated to political parties in a way that leaves the contribution unregulated (What is the difference between soft money and hard money campaign donations?).  Soft money can be donated towards “party building” which is also loosely defined and unregulated. Therefore, companies, unions and individuals may give donations in any amount to a political party for the purpose of “party building.” An article from How Stuff Works provides a good example of the loophole that is soft money; “Candidate X runs an ad that says, “I am a good person. Candidate Y is a bad person. Vote for me on election day.” Because of the “Vote for me…” portion, this is a political ad, which must be paid for with “hard money.” Candidate Y runs an ad that says, “Candidate X has a record that includes awful things. If these awful things continue, people will come to your house, steal your money and shoot your dog. Be sure to vote on election day.” Because the ad “educates” people on an issue and doesn’t tell them to vote for a particular candidate, it’s party building, and can be paid for by soft money” (What is the difference…). The ability of both parties’ ability to raise hard money also influences the direction that fundraising takes. History has shown that the Republican Party almost always outdid the Democratic Party in their ability to raise hard money, often by two to 1. Democrats have often been able to lessen the extent of this difference through the use of soft money, see Figure 1 (Moscardelli).

American campaign finance law has been described as more loophole than law. Congress and courts work to clarify and perfect existing regulations, but as society evolves so do campaign practices and candidates whereby political parties and individuals find new ways to bend the rules (Ansolabehere, 598). Eliminating “soft money” seems like an attractive way to reduce corruption and undue influence. But, as of 1998, soft money only accounted for 12% of total national campaign fundraising. Stephen Ansolabehere and James M. Snyder Jr. estimate that closing the soft money loophole would strongly affect the presence of local and state party organizations, so much so that they estimated that the removal of soft money would have caused 2 million less Americans to vote in 1996 (Ansolabehere, 619).

Cuomo’s Commission

The Moreland Act, which was passed into law in 1907, allows a governor to examine management and affairs of any department by himself or with the help of others. Under this act Governor Andrew M. Cuomo of New York, created the “Commission to Investigate Public Corruption” earlier this year in July(Roy, 1). The commission was created to “probe systemic corruption and the appearance of such corruption in state government, political campaigns and elections in New York State” (Governor Cuomo Appoints Moreland…). Governor Cuomo himself provides reason for his commission: “I put forward the most comprehensive and aggressive legislative package Albany has seen in decades to address the corrosive influence of money in elections, strengthen prosecutors’ ability to fight corruption, increase penalties against those who violate the public trust, and give voters more access to the ballot box. From the beginning, I said I would not accept a watered-down approach to cleaning up Albany and that the Legislature must either pass this legislative package or I would empanel an investigative commission tasked with accomplishing these same goals to achieve reform. Since the Legislature has failed to act, today I am formally empanelling a Commission to Investigate Public Corruption pursuant to the Moreland Act and Section 63(8) of the Executive Law that will convene the best minds in law enforcement and public policy from across New York to address weaknesses in the State’s public corruption, election and campaign finance laws, generate transparency and accountability, and restore the public trust” (Governer Cuomo Appoints Moreland…). After four months of work, Coumo and his commission believe that the best way to remove corruption in political campaigns is by requiring public financing (Roy, 1).  Just like the entire nation, the State of New York feels that reforms are necessary to restore public confidence in their government. Governor Cuomo and his commission have created something similar to the FEC in their desire to hunt and take out injustice, but it is insufficient to have just one state with strong campaign finance controls. To complement the national FEC, each and every state must have a commission with honorable and representative commissioners who seek out and eliminate corruption in their elections.

Defining Key Groups and Ideas

            Buckley vs. Valeo is a very important case in regards to campaign financing. This case arose directly after the 1974 amendments to the FECA. Senator James Buckley filed a lawsuit against Secretary of State Francis Valeo in 1975. The Supreme Court held that a key provision of the amendments to the Campaign Finance Act, which limited expenditure during election campaigns, was “unconstitutional” (Buckley vs. Valeo). Under this case, candidates for office have the constitutionally protected right to raise and spend private money. Also, individuals or groups can make unlimited expenditures to support or oppose a candidate as long as the expenditures are independent from the candidate they are intended to help (Buckley vs. Valeo). I believe that the decisions from this court case raise some issues that must be reconsidered; I will address them later in the solution section of this paper.

So, what exactly does it mean for a campaign to be publicly funded? Public financing of campaigns is also called party subsidies, where money is paid directly from the government to a political party or to fund some of its activities. Many countries other than the United States use this form of financing or something similar, especially in South America and Europe. Proponents argue that public financing leads to less government corruption, as well as greater civic involvement and thus greater faith in the political process (Wertheimer, 1161).

Political Action Committees

PACs have been around since 1944, when the Congress of Industrial Organizations (CIO) formed the first one to raise money for the re-election of President Franklin D. Roosevelt (Opensecrets, PAC’s). This term is used to describe any political group organized for the purpose of raising money to support or defeat a candidate.  “PACs can give $5,000 to a candidate committee per election (primary, general or special). They can also give up to $15,000 annually to any national party committee, and $5,000 annually to any other PAC. PACs may receive up to $5,000 from any one individual, PAC or party committee per calendar year” (Opensecrets, PAC’s). Since 1944 Political Action Committees have had a major impact on the money involved in elections. The following two figures from opensecrets.com will show just how large this impact is today.  The first figure show the total money raised by all PAC’s in any industry in any political party over the past 25 years. The second figure shows the individual PAC’s who donated the most money for 2013-2014.

 

527 Organization’s

527 organizations came into existence under the Internal Revenue Code of 19-86, and exist as tax-exempt organizations that engage in political activities, often through unlimited soft money contributions. Because these organizations cannot coordinate their work with political campaigns, and cannot expressly support or oppose specific candidates, they are not subject to the same regulations from the FEC as groups such as Political Action Committees. The $5,000 cap does not apply to them and since they use mostly “soft” money, it is even harder for the FEC to regulate them (Isakoff, 703).

The Solution

            With the help of writings by scholars who have been researching this issue much longer than I. I have devised a plan of action to change the way that campaigns are financed in the United States.

First of all, there needs to be legislative action taken that provides incentives for campaigns that are financed publicly. There must be a readily available source of public campaign resources as well as reasonable spending limits on both hard and soft money, to allow candidates to run for office without being dependent on donors or lobbyists. This can be done by rewarding candidates who voluntarily stay under the spending limits with the use of public campaign resources.  These rewards can come in a variety of forms such as grants (which have been used in presidential general elections), matching payments (which is currently used in presidential primaries), and voter communication vouchers (Wertheimer, 1149).  It must also be ensured that there is no disadvantage, real or perceived from staying under the spending limits. All candidates who are involved will be subject to random audits to make sure they comply with the law.

Second, most of the money that is raised for campaigns goes toward advertising costs. Congress could even the playing field and remove or mitigate the influence of big business backing by providing periods of free television time for those candidates that abide by the spending rules. Candidates could use this public resource as an opportunity to support themselves or argue against their opponents. Because of the ruling of Buckley vs. Valeo, it is a constitutional right for candidates to raise private money and that private money will continue to play a role (at least in the near future). That is why the incentives are such an important component, raising private money should be able to accomplish as much as using the public resources at hand.

Third, the role of PAC’s must be reduced. There is no limit on the aggregate total amount of PAC money a candidate may accept during a lifetime. A suggested solution has been to ban all PAC’s from campaign financing, yet as a result of Buckley vs. Valeo, this sort of law is unlikely to hold up in court due to people’s first amendment rights. Instead there should be new strict PAC contribution limits, much stricter than the current monetary restrictions. The current restrictions can also be strengthened by enacting anti-bundling laws, so that money-bundling loopholes do not undermine the contribution limits (Wertheimer, 1155).

Fourth, although I indicated earlier about how removing soft money could possibly result in 2 million fewer Americans going to the polls on election day, soft money still provides a large avenue for loopholes. Wertheimer and Manes do a good job of describing how soft money can be removed from our system: “Two basic steps must be taken to shut down the soft money system. First, political parties should be required to spend only contributions that meet federal contribution limits on activities that affect Federal elections, including get-out-the-vote drives. Congress needs to reaffirm that no corporate or labor contributions, and no individual or PAC contributions greater than the Federal contribution limits, can be used by the political parties on campaign activities that affect federal elections. Second, federal officials, federal candidates, and the national political parties must be barred from raising contributions that are illegal when used in federal campaigns” (Wertheimer, 1156). This will also lead to more public disclosure on who is receiving money and from where, making the process much more transparent (although disclosure may not necessarily improve representation by itself).

Finally, for all of these provisions to actually make an impact there needs to be a driving force behind them, the Federal Election Committee. The FEC does not currently have the power and the credibility to make a significant difference in campaign financing. I propose that the FEC be broken down by state, so that there may be a commission within each state that regulates the financing of elections, similar to the commission that Governor Cuomo created. It is also important that the commissioners of each of these counsels be independent, qualified and impartial. To help restore credibility to the FEC board, the president should establish a panel of distinguished private citizens, such as law school deans and former judges, to recommend potential nominees to serve as Commissioners. The panel should be charged with recommending individuals with a commitment to independent and impartial enforcement (Wertheimer, 1158). If these steps are taken the American people can start to feel that their elections are run with integrity and honesty. If change is truly made the American people will feel that they live in a democracy where representation and fairness rule over all else.

Conclusion

The United States needs legislation that allows for public financing of political campaigns. By limiting the amount of private donations in campaigns and relying more heavily on a publicly financed campaigns, we would be living democracy 24/7, 365 days a year, not solely on the days that Americans go to the polls. The change starts with the politicians in Congress. They must give more power to the FEC, and create subdivisions in each state in order to have a better hold on regulating corruption and fraud in our elections.  We are (hopefully) moving towards a society where honesty and integrity are the virtues that bear the most weight. Once the government sets this precedent, businesses and individuals will realize that donating private money through loopholes in the system does not actually benefit the greater good. In order for our society to function optimally our elected officials must truly represent the entire population of citizens, not a small minority of wealthy individuals and groups.

Figure 2 (opensecrets.com):

Works Cited

“About FEC.” Federal Election Commission. http://www.fec.gov/about.shtml

Ansolabehere, S., & Snyder, J. M.,Jr. (2000). Soft money, hard money, strong parties. Columbia Law Review, 100(3, Symposium: Law and Political Parties), 598-619.

Baran, J. W., & Bauer, R. F. (2006). More rules, more money.

“Buckley vs. Valeo.” 424 U.S. 1, 96 S. Ct. 612, 46 L. Ed. 2d 659 (1976). January 30, 1976. CaseBriefs. Bloomburg Law.

Corriher, Billy. “Campaign Finance Laws Fail as Corporate Money Floods Judicial Races.” Think-Bank. http://www.americanprogress.org/issues/civil-liberties/report/2013/01/15/49589/campaign-finance-laws-fail-as-corporate-money-floods-judicial-races/

“Criminal Resource Manual 2413.” United Sates Department of Justice. 2013. http://www.justice.gov/usao/eousa/foia_reading_room/usam/title9/crm02413.htm

Fleishman, Joel L (A). “Freedom of Speech and Equality of Political Opportunity: The Constitutionality of the Federal Election Campaign Act of 1971.” NCL Rev. 51 (1972): 389.

Fleishman, Joel L (B). “The 1974 Federal Election Campaign Act Amendments: The Shortcomings of Good Intentions.” Duke Law Journal 1975.4 (1975): 851-899.

“Governor Cuomo Appoints Moreland “Commission to Investigate Public Corruption,” with Attorney General Schneiderman Designating Commission Members as Deputy Attorneys General.” NY Gov. http://www.governor.ny.gov/press/07022013-new-moreland-commission-named

Isakoff, P., & Lee, S. (2008). 527 groups and fairness in federal elections: Providing an avenue to greater fairness in federal elections through increased regulation of 527 groups.

Mann, E. Thomas. “Campaign Finance Reform.” Testimony. March 27, 1996. Brookings. http://www.brookings.edu/research/testimony/1996/03/27uspolitics-mann

McCain-Feingold Goes to Court.(Campaign Reform Bill in the U.S. Congress)(Editorial). 151 Vol. , 2002. Print.

Moscardelli, Vincent, Haspel, Moshe,. (2007). Campaign finance reform as institutional choice. American Politics Research, 35(1), 79-102.

<Opensecrets.com> Center for Responsive Politics.

Roy, Y. (2013, November 14). Campaign-finance push; corruption panel leaders favor guv’s public route; state GOP chair sees panel used to push reform. Newsday (New York), pp. A30.

Wertheimer, F., & Manes, S. W. (1994). Campaign finance reform: A key to restoring the health of our democracy. Columbia Law Review, 94(4), 1126-1159.

“What is the difference between soft money and hard money campaign donations?” How Stuff Works. Money. http://www.howstuffworks.com/question498.htm

Wynn, Albert R. Why I Oppose Shays-Meehan., 2001. Print.

Zardkoohi, A. (1985). On the political participation of the firm in the electoral process. Southern Economic Journal, 51(3), 804-817.

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One comment on “Campaign Finance Reform: A Necessary Change

  1. Pingback: The Representatives’ New Clothes | JPCooper & Fellows

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