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THE REGULATION OF ELECTION FINANCE IN THE UNITED STATES AND PROPOSALS FOR REFORM
Herbert E. Alexander
Throughout the past generation, the integrity of the electoral process has been an issue in both the United States and Canada. The result has been simultaneous efforts to regulate the financing of the electoral systems of the two countries.
In both nations, efforts to reform have been closely connected with scandals but also associated with a fear that the increasingly television-oriented nature of campaigns was pricing candidates or parties out of the political arena. These issues, in turn, led directly to major campaign finance legislation in the United States and Canada during the 1970s: The U.S. Congress enacted no fewer than five significant campaign laws during that decade, while the Canadian Parliament in 1974 approved the sweeping Election Expenses Act.
And today, both the U.S. and Canadian legislatures are contemplating major overhauls of their respective campaign laws amid the realization that existing statutes have produced some unforeseen and unintended consequences in their respective electoral systems.
Despite such parallels, however, it must be emphasized that the U.S. and Canadian experiences with campaign reform are not interchangeable. Foremost among the reasons is that the United States lacks a Canadian-style, party-oriented type of politics. In fact, the U.S. reforms of the 1970s tended to weaken the power of the political parties - so much so that some critics blame those laws for the brand of interest-group politics now omnipresent at both the federal and state levels.
As in Great Britain, Canada’s parliamentary system features a highly centralized party structure, and the important functions of fiscal coordination and distribution of money during elections rest largely with party committees. U.S. politics, on the other hand, centres on candidates, not parties. Money is most often contributed to candidates and their personal campaign committees, and political parties must compete with candidates for the available dollars. Campaign strategies and tactics, particularly since the advent of radio and television, tend to project a candidate’s personality; in many instances, party identification is downplayed or even totally ignored.
Any preface to a study of the federal political finance system in the United States also must underscore the fact that the Congress has been merely one of several players in determining how the system works. While Congress has drafted the laws and presidents have signed them, their actual implementation has been shaped by the interpretations of regulatory agencies and the courts, to say nothing of savvy election lawyers and political operatives constantly looking for innovative ways to avoid the law or to interpret it favourably.
For example, while Congress in 1974 loosened restrictions on the formation of political action committees, or PACs, it was an opinion handed down by the Federal Election Commission (FEC) in 1975 that prompted a dramatic increase in the number of corporate PACs. And the growth of these controversial groups was further accelerated in 1976, when the U.S. Supreme Court ruled that mandatory ceilings on spending in congressional campaigns violated the First Amendment to the U.S. Constitution.1 The result is that, today, reform efforts are being fueled in large part by concern over the increasing dependence on PACs to fund congressional campaigns.
The constant testing of the legal parameters of U.S. campaign finance law has produced a regulatory system that can best be described as a hybrid. On one hand, there is the presidential campaign structure, a highly regulated system in which candidates receive significant amounts of public funding in return for agreeing voluntarily to expenditure ceilings and limits on the use of their personal wealth. On the other hand, there is the congressional regimen, where - like the presidential system - candidates must disclose receipts and expenditures and abide by limits on contributions from individuals, PACs and political parties. Other than that, however, the political equivalent of the free market reigns in congressional races as a result of the 1976 Supreme Court ruling coupled with the unwillingness of the Congress to enact public financing and spending limits for campaigns for the Senate and the House.
The difference in the regulatory structures of presidential and congressional campaigns naturally has produced substantial variation in the issues confronting each system. It also has prompted reformers and their legislative allies to push to narrow those differences - by seeking to enact public financing and to impose constitutionally acceptable restrictions on congressional campaigns. The problems bedevilling the operation of U.S. campaign finance laws and the proposals to resolve them are a central focus of this study.
First, however, a short history is necessary to show how the current situation evolved.
HISTORY
The decade of the 1970s saw the most sweeping changes in federal election statutes since the Progressive Era more than 60 years earlier. As mentioned, five major campaign finance laws were passed by Congress before the decade was out: the Federal Election Campaign Act of 1971 and the FECA Amendments of 1974, 1976 and 1979 as well as the Revenue Act of 1971. While this surge of activity is often associated with the Watergate scandal of the early 1970s, it should be noted that two of these laws-the basic Federal Election Campaign Act and the Revenue Act - were enacted by Congress almost six months prior to the genesis of that scandal in mid-1972.
Prologue: 1925-71
The Federal Election Campaign Act replaced a statute that had been on the books more than 45 years: the Federal Corrupt Practices Act of 1925. That law, passed in response to the “Teapot Dome” scandal of the early 1920s, was, in turn, a codification of several campaign reform laws enacted in the 1907-11 period at the height of the Progressive Era.
Whatever the intentions of its framers, the Federal Corrupt Practices Act was notable mainly for its ineffectiveness during the years following its enactment. The law contained limits on spending in congressional races that were so unrealistically low that they were simply ignored by federal regulators as well as by candidates. The statute also required disclosure of campaign spending by candidates for Congress (presidential aspirants were not covered). However, it was so imprecisely worded that many candidates chose to interpret it as requiring disclosure of only their personal expenditures and thereby reported only a fraction of their actual campaign costs.
In 1940, Congress supplemented the Federal Corrupt Practices Act with a provision in the so-called Hatch Act limiting to $5 000 per year contributions by individuals to a federal candidate or campaign committee. This had little effect on restraining large contributors: a candidate would simply set up numerous campaign committees, and a well-endowed contributor could give $5 000 to each.
The pressure for changing this loophole-ridden system began building after the Second World War and received a major boost when John F. Kennedy appointed the President’s Commission on Campaign Costs in late 1961 (President’s Commission 1962). In May 1966, Kennedy’s successor, Lyndon B. Johnson, called upon Congress to pass comprehensive campaign finance reform - partly, he said, to deflect congressional criticism that Democratic Party donors were benefiting from lucrative federal contracts. “Despite the soaring expense of political campaigns, we have done nothing to insure that able men of modest means can undertake elective service unencumbered by debts of loyalty to wealthy supporters. We have laws dealing with campaign financing. But they have failed … They are more loophole than law. They invite evasion and circumvention. They must be revised.”2
But it was five more years before campaign finance reform was enacted into law. While reform legislation - belatedly backed by Johnson - was approved by Congress in 1966, it was suspended by the Senate a year later amid disagreements over how or whether it should be implemented.
Federal Election Campaign Act of 1971
Throughout both Canadian and U.S. history, campaign reform laws almost always have owed their enactment to scandal. “Response to scandal has been the usual impetus for electoral reform in Canada, whether it was the Pacific Scandal, the Winnipeg General Strike, or the FLQ crisis,” Patrick Boyer, a member of the Canadian Parliament, recently remarked (Canadian Study of Parliament Group 1990, 2). Likewise, the U.S. reform statutes adopted during the early part of the 20th century were a direct response to the excesses of the Gilded Age and the Teapot Dome affair; the Federal Election Campaign Act amendments of the mid-1970s were Watergate induced.
One of the few exceptions to this historical pattern was the passage of the original Federal Election Campaign Act of 1971, commonly known as FECA. Instead of scandal, the legislative impetus was a concern that rapidly rising campaign costs were pricing many candidates out of the market. According to figures compiled by the Federal Communications Commission, the amount spent on television and radio by U.S. political candidates had increased 150 percent between 1956 and 1964. In 1970, the year before the passage of FECA, a study by the National Committee for an Effective Congress found that in the seven largest states where Senate elections were held, 11 of 15 candidates were millionaires.3
Ironically, FECA was destined to have little or no effect in controlling campaign costs. A provision was included that limited candidates for federal office to 10 cents per voter on “communications media.” This was replaced by a more comprehensive series of limits in 1974, which, in turn, were declared unconstitutional by the U.S. Supreme Court in 1976 (see section below on the Buckley v. Valeo decision).
However, other provisions of the FECA have, over the past two decades, shed a great deal of light on the ways in which American campaigns are conducted. The Act established a framework for comprehensive campaign disclosure for presidential and congressional candidates, and set an example that state legislatures across the country were to look to as a model. Today, all 50 states require some form of campaign finance disclosure for statewide and state legislative candidates - and often for local campaigns as well.
Under the provisions of FECA, political committees with $1 000 or more in receipts or expenditures are required to file regular reports. This monetary test closed the long-standing loophole in the Federal Corrupt Practices Act that had required reporting only by those committees operating in two or more states; this had long allowed committees operating in just one state to avoid disclosing their receipts and expenditures.
FECA also required that expenditures and donations of more than $100 by and to federal candidates and political committees be itemized and listed for disclosure, including the contributor’s name, address, occupation, place of business and the date and amount of the contribution. (The 1979 FECA amendments raised the threshold for itemization to in excess of $200.) And, in another contrast to the Federal Corrupt Practices Act, the new law’s disclosure requirements covered primaries as well as general elections.
Finally, FECA firmly established the principle of both pre- and postelection disclosure in federal campaign finance. The current FECA filing schedule (the 1979 FECA amendments made some relatively minor adjustments to the 1971 law) calls for congressional candidates to file quarterly reports during an election year and semi-annual reports in the “off years.”
In addition, office seekers must file reports 12 days before primary and general elections, and thereafter report last-minute contributions of $1 000 or more in writing within 48 hours. Like congressional hopefuls, presidential aspirants file semi-annually except for a year in which the presidency is at stake; they then must file monthly if they have raised more than $100 000. (This, of course, differs markedly from the Canadian parliamentary system, in which the uncertain scheduling of elections and the short duration of campaigns provide obstacles to disclosure once the election has been called.)
To collect and monitor the required financial information, the Senate-passed version of the 1971 law proposed the creation of an independent commission to administer and enforce the law. But this proposal was killed by the House of Representatives, and it would be another three years before Congress would create such an independent agency.
The episode illustrates the dichotomy between the Senate and the House on campaign finance reform that persists to this day. It is a split that transcends partisan affiliations. Many House members represent relatively homogeneous districts that provide them with “safe seats”; they are consequently leery of anything that disturbs the electoral status quo. On the other hand, members of the Senate - many of whom represent large, diverse states - are more accustomed to competitive elections and generally are less fearful of enhancing opportunities for political challengers.
President Richard M. Nixon signed FECA on 7 February 1972, and it took effect on 7 April 1972. Ironically, the law was to play a key role in the Watergate affair that led to Nixon’s resignation two and a half years later.
Revenue Act of 1971
President Nixon also signed the Revenue Act of 1971 after exacting a concession from Congress that public financing of presidential elections would be postponed until after the 1972 election. This saved Nixon, then seeking his second term, from having to compete under a system of public financing.
The Revenue Act of 1971 had its origins in the 1966 Long Act (named for Sen. Russell B. Long, D-Louisiana). The Senate thwarted the implementation of that Act in 1967. The 1971 law reflected the Long Act in that it created a Presidential Election Campaign Fund supplied by a $1 “checkoff” on federal income tax returns. But the Revenue Act revised Long’s original proposal so that the funding would go directly to presidential candidates rather than being funnelled through political parties. The latter proposal had engendered criticism from several legislators who feared it would place excessive power in the hands of party chairpersons.4
The income tax checkoff has been a fixture on federal income tax returns since 1972. Anyone with at least $1 in income tax liability is permitted to designate that amount ($2 on joint returns) to the Presidential Election Campaign Fund. (See “Presidential Campaigns” section of “Issues for the 1980s” for a discussion of declining taxpayer participation in the checkoff.)
The Revenue Act of 1971 also provided for a tax credit and tax deduction to encourage political contributions. However, these incentives turned out to be short lived. The deduction was raised in 1974 from $50 to $100 ($200 on a joint return) but was then repealed by the Revenue Act of 1978. Meanwhile, the tax credit for one-half the amount of contributions up to a limit of $12.50 was raised to $25 ($50 on a joint return) in 1974 and then to $50 ($100 on a joint return) in 1978 to counterbalance the repeal of the deduction. But the credit was repealed when Congress overhauled the federal income tax system in 1986. There have since been numerous calls to reinstate the credit as a means of encouraging small donations from individual contributors, much as the Canadian system seeks to accomplish this by providing tax deductions for donations of less than $500 Canadian.
FECA Amendments of 1974
The Watergate scandal brought passage of the Federal Election Campaign Act Amendments of 1974, which represented the most sweeping change imposed on the interaction between money and politics since the creation of the American Republic almost 200 years earlier. The 1974 law continues to have a profound impact on the ways in which today’s federal election campaigns are conducted.
In July 1973, the Senate passed a bill that put a ceiling on campaign spending, limited individual contributions and created an independent election commission. But, once again, the measure stalled in the House.
In the spring of 1974, after shutting off a filibuster by southern Democrats and conservative Republicans, the Senate passed a second reform bill that combined its 1973 measure with a call for public funding of congressional as well as presidential elections. Finally, just hours before Nixon announced his resignation from the presidency on 8 August 1974, the House overwhelmingly passed campaign reform legislation. But it differed markedly from the Senate bill in that it provided public financing only for presidential elections. After an often bitter standoff between House and Senate negotiators that lasted for weeks, the Senate conceded, and the final bill, signed by President Gerald R. Ford on 15 October 1974, contained public funding only for presidential elections.
However, the FECA Amendments of 1974 greatly expanded upon the Revenue Act of 1971, which had provided grants to presidential candidates for the general election only. Included were public matching funds for small private donations raised during the prenomination period, flat grants to political parties for their national nominating conventions, and large grants to major party presidential nominees to provide full public financing of general election campaigns. This structure also contained spending limits on presidential candidates in both the pre- and post-nomination periods. Coincidentally, the Canadian system of spending ceilings and public funding for political parties was enacted the same year. (See “Presidential Campaigns” in the next section for a description of the U.S. public funding structure.)
The presidential financing system, which has operated in the last four presidential elections beginning in 1976, is one of three major provisions of the FECA Amendments of 1974 still in force today. An independent regulatory agency, the Federal Election Commission (FEC),was formed to collect disclosure reports, administer public financing and enforce election statutes. But from the outset, some members of Congress clearly did not want the commission to exercise much independence when it came to regulating congressional elections. The FEC was structured originally so that four of its six members were appointees of the House and Senate. When this scheme was rejected by the Supreme Court (see the following section on Buckley v. Valeo), Congress responded by further circumscribing the FEC’s power.
The other major part of the 1974 law still in effect sharply curtailed the role of that long-time fixture of American politics - the large contributor. In contrast to the millions of dollars contributed by men such as insurance magnate Clement Stone and the hundreds of thousands by General Motors heir Stewart Mott during the 1972 campaign, individuals were barred from giving a presidential or congressional candidate more than $1 000 per election. They also were not permitted to exceed an annual aggregate ceiling of $25 000 for contributions to all federal candidates and committees (see table 1.1).
If the FECA Amendments of 1974 shut off one major source of campaign cash, they spurred the growth of another: the political action committee, or PAC. In that respect, the 1974 law provides an example of campaign reform’s law of unforeseen consequences: Given the pluralistic and dynamic nature of the U.S. political system, efforts to solve one set of problems plaguing the system almost invariably give rise to another set of problems. As noted earlier, PACs have served to increase the role of special interests in the political process and have become as controversial as the individual “fat cats” of yesteryear; however, the institutionalization of contributions raised through PAC solicitation systems and PAC special interest pleading linked to lobbying causes more concern than did the individualistic large contributor of earlier years.
Table 1.1 Contribution limits
(in dollars)
Source: Federal Election Commission.
aFor purposes of this limit, each of the following is considered a national party committee: a party’s national committee, the Senate Campaign committees and the National Congressional committees, provided they are not authorized by any candidate.
bCalendar year extends from January 1 through December 31. Individual contributions made or earmarked to influence a specific election of a clearly identified candidate are counted as if made during the year in which the election is held.
cEach of the following elections is considered a separate election: primary election, general election, run-off election, special election and party caucus or convention which has authority to select the nominee.
dA multicandidate committee is any committee with more than 50 contributors which has been registered for at least six months and, with the exception of state party committees, has made contributions to five or more federal candidates.
eLimit depends on whether or not party committee is a multicandidate committee.
fRepublican and Democratic Senatorial Campaign committees are subject to all other limits applicable to a multicandidate committee.
gGroup includes an organization, partnership or group of persons.
N/A = not applicable.
PACs were legal prior to the passage of the 1974 law. But, traditionally, they were utilized primarily by labour unions, which collected voluntary political contributions from members and funnelled them to favoured candidates. While the FECA of 1971 legitimized PACs, the blossoming of the corporate PAC can be traced to the 1974 FECA amendments, in which Congress repealed the provision of the 1939-40 Hatch Act barring corporations and unions that held federal contracts from forming PACs.
Ironically, it was organized labour that took the lead in lobbying for the repeal: unions with government contracts to train workers were concerned that they would have to abolish their PACs unless the law was changed. But the far more significant impact was to allow many large corporations with defence contracts to establish PACs. Many of the largest companies in the United States have since done so.
At the time of the FECA Amendments of 1974, the PAC issue received far less attention than the series of mandatory spending limits placed on congressional races. These limits never took effect. They were to be wiped out little more than a year later by a landmark Supreme Court ruling.
Buckley v. Valeo: Campaign Reform and the Constitution
In January 1975, a few days after the 1974 law became effective, a suit was brought contending that the new law violated several rights guaranteed by the First Amendment to the U.S. Constitution.5 On 30 January 1976, a little more than a year after the case was filed, the Supreme Court reversed a U.S. Court of Appeals ruling and found several major sections of the FECA Amendments of 1974 to be unconstitutional (Buckley v. Valeo 1976). The decision was to have a significant impact on the regulation not only of federal elections but also of state and local elections.
In Buckley v. Valeo, the court faced a difficult judicial task: to balance the First Amendment rights of free speech and free association against the clear power of the legislature to enact laws to protect the integrity of the electoral system. The central question was posed by Justice Potter Stewart during oral arguments: Is money speech and speech money? Or, stated differently, is an expenditure for speech the same thing as speech itself, given the expenditures necessary to buy broadcast time or newspaper space to reach large audiences?
A majority of the court answered the question in the affirmative, ruling expenditure limits to be a “substantial” restraint on free speech that could prevent a candidate from making “significant use of the most effective modes of communication.” Consequently, the Supreme Court rejected as unconstitutional the mandatory spending limits placed on presidential and congressional campaigns by the 1974 law. Also thrown out were restrictions on the amount a candidate could spend using his or her personal resources. (The 1971 FECA law had limited presidential and vice-presidential candidates to contributing $50 000 of their own money or that of their immediate family; for Senate and House candidates, the thresholds were $35 000 and $25 000, respectively.)
However, the court made a significant exception to this finding: If a candidate voluntarily accepted public financing, the government could require him or her to abide by campaign expenditure limits and other restrictions as a condition of that acceptance. The impact of this was to preserve the presidential financing structure outlined in the 1974 FECA amendments; during the last four presidential elections, all but one of the major candidates have taken public funding and abided by the prescribed limits. But the Buckley decision invalidated the spending ceilings in congressional races because the 1974 law did not provide public financing as a means of enticing legislative candidates to comply voluntarily with the limits.
While eliminating mandatory spending limits, the justices ruled the other major underpinning of the 1974 FECA amendments - contribution limits - to be constitutional. The court asserted that these represented only a marginal restriction on a contributor’s First Amendment rights because “the quantity of communication by the contributor does not increase perceptibly with the size of his contribution.” In this instance, the court said that First Amendment considerations were outweighed by the possible influence of large contributors on a candidate’s positions, which, in turn, could lead to real or perceived corruption once the candidate took office.
Finally, the Supreme Court, while upholding the concept of a bipartisan regulatory commission to administer campaign finance laws, ruled the nomination procedure of the new Federal Election Commission to be unconstitutional. The court said that the requirement in the 1974 FECA amendments that four of the six commission members be appointed by Congress represented an attempt by the legislative branch to assume powers reserved for the President. The need for Congress to reconstitute the FEC to meet the court’s objections opened the way for the third debate over federal campaign finance law within five years.
FECA Amendments of 1976
The 1976 FECA amendments were designed to conform the law to the Buckley decision. That decision, in fact, gave Congress 30 days to transform the Federal Election Commission into a body entirely appointed by the president. President Ford wanted legislation that would simply remedy the FEC’s constitutional flaws, and he argued against Congress reopening the entire campaign finance reform debate. He did not get his wish, as Congress undertook significant revisions dealing with the FEC’s powers. A highly partisan clash over PACs ensued as labour, alarmed at a FEC decision favourable to the growth of corporate PACs, sought to limit the fund-raising ability of such committees.
The FEC, formally organized in April 1975, was created to centralize the administrative and enforcement functions that had been divided between three different congressional offices in the FECA legislation in 1971. From the outset, there was apparent potential for conflict between the new commissioners’ ties to Capitol Hill and their responsibility for impartial handling of campaign finance issues involving Congress: under the procedure ultimately ruled unconstitutional by the Supreme Court in 1976, four of the first six appointments to the commission were former U.S. House members.
Nonetheless, conflict soon erupted between some powerful members of Congress and their ex-colleagues on the Commission. In fact, Congress rejected the first two regulations proposed by the FEC.6
Meanwhile, in November 1975, barely two months before the Buckley decision, the FEC issued advisory opinion (AO) 1975-23 in the so-called SunPAC case. In a 4-2 decision, the FEC ruled that SunPAC, the Sun Oil Co.’s political action committee, could use corporate funds to solicit voluntary political contributions from employees and stockholders. Reassured by the FEC about the legal validity of corporate PACs, the business community soon recognized their potential as a means of competing with labour unions for political influence. Consequently, in the six months following the SunPAC decision, the number of corporate PACs more than doubled.
Labour, which had badly miscalculated how much the FECA Amendments of 1974 would benefit corporate PACs, counter-attacked when the FECA Amendments of 1976 reached the floor of Congress. Angered by FEC’s SunPAC opinion, labour lined up behind a Democratic Party proposal under which companies would be allowed to solicit PAC contributions only from stockholders and “executive or administrative personnel.”
But the Republicans, who saw in corporate PACs a major new ideological and financial ally, rushed to their defence, arguing that the Democrats’ proposal would tip the “partisan advantage” towards labour. President Ford hinted at a veto if the restrictions on corporate PACs remained in the Bill. Ultimately, a compromise was reached under which corporate PACs were permitted to seek contributions from all company employees, by mail, twice a year. Although the restrictions hardly pleased business interests, they did little to impede the continuing growth of corporate and trade association PACs during the decade that followed.
The 1976 PAC debate also provided another lesson in campaign finance reform’s law of unforeseen consequences. While the Republicans viewed corporate and trade association PACs as their natural allies, many of these PACs turned out to be far more pragmatic than ideological in their choice of candidates: a substantial portion of their donations were directed to Democrats in the years to come. This increasingly angered the Republicans as time went on, and, little more than a decade after the 1976 FECA amendments, a Republican president and Grand Old Party (GOP) congressional leaders were advocating an outright abolition of PACs. (See “Congressional Campaigns” in the next section for discussion of the PAC issue.)
To meet the constitutional objections raised by the Supreme Court, the 1976 FECA amendments also reconstituted the FEC as a six-member body appointed by the president and subject to confirmation by the Senate. Having lost the ability to directly appoint commissioners, Congress moved aggressively to make its own partisan recommendations to the President when seats on the Commission came open. (See “The FEC under Fire” in the following section.)
Congress also sought other means to keep the FEC on a tight leash. For example, it mandated that a vote of four Commission members would be necessary to issue regulations and advisory opinions, as well as to initiate civil actions and investigations. On a Commission that, under law, could contain no more than three members of the same political party, the effect of this was to give both the Democrats and the Republicans veto power over Commission actions. During the 1980s, this requirement has produced 3-3 stalemates on some of the most controversial questions facing the FEC; in two major instances, the Commission acted only after being faced with federal court orders.
FECA Amendments of 1979
By the time the FECA Amendments of 1976 were signed into law in May of that year, it was clear that the initiative in campaign finance regulation had passed from reformers and their allies in the media to those directly affected by the new rules of the game: incumbent legislators, political parties and major interest groups. President Jimmy Carter, who took office in January 1977, sought to make public financing of congressional elections a major legislative priority. But the proposal did not succeed in gaining a majority in either house of Congress during Carter’s term.
The one major piece of campaign-related legislation that did pass was the FECA Amendments of 1979, which were far more a response to the complaints of political candidates and operatives than to the visions of reformers. The 1979 FECA amendments were designed largely to reduce the paperwork burden on campaigns by easing the reporting requirements imposed on candidates and political committees. They thus represented a relaxation of some of the constraints that earlier reforms had placed on those in the political process.
During the late 1970s, there was considerable discussion regarding the impact of the FECA among those regulated by federal campaign law. In response, the House Administration Committee in August 1978 commissioned a study by Harvard University’s Institute of Politics. The assessment singled out three problems: it found that the law set individual contribution limits too low, it imposed burdensome reporting requirements on campaigns, and it weakened the role of political parties (Harvard University 1979). Several of the recommendations in the report were influential when possible revisions to FECA were taken up by the Senate Rules Committee in mid-1979.
Perhaps the greatest controversy during the debate over the 1979 FECA amendments centred around the conversion of excess campaign funds to personal use. The Senate wanted to ban such a practice; the House did not. In a compromise, the final legislation barred the conversion of campaign funds to personal use but exempted all House members in office at the time of the law’s enactment: 8 January 1980. They were given the prerogative of converting the campaign funds upon retirement.
This provision, which became known as the “grandfather clause,” did not end the controversy. Throughout the 1980s, there were calls to do away with that clause, as media stories focused on retiring House members who, in some cases, converted hundreds of thousands in campaign dollars to personal use. Finally, in a November 1989 pay-raise package, Congress repealed the grandfather clause as of January 1993, thereby giving senior House members several years to decide whether to retire and take personal advantage of campaign treasuries that in some cases exceeded half a million dollars.
Virtually overlooked amidst the grandfather clause debate were provisions in the FECA Amendments of 1979 that were to have far-reaching and often controversial effects during the 1980s.
In response to complaints that some of the law’s restrictions had eliminated the role of state and local parties in presidential contests, the 1979 law allowed state and local parties to underwrite voter registration and get-out-the-vote drives on behalf of presidential tickets without regard to financial limits. This provision also applied to campaign material used in volunteer activities, such as slate cards, sample ballots, palm cards, and certain buttons, bumper stickers, and brochures. In addition, the law permitted certain of these party- or ticket-oriented materials to make passing reference to a presidential candidate without it counting against the spending limits of the presidential contest.
The growth of these activities fuelled the “soft money” debate of the 1980s as presidential campaigns took full advantage of the 1979 amendments to exceed the official spending ceiling imposed by law.
Reform Takes a Pause
By the beginning of the 1980s, the United States had in place a system of election regulation that had taken most of the previous decade to enact and fine-tune. Federal elections were subject to strict rules for disclosure of spending and receipts, and the role of the wealthy donor was greatly diminished by the availability of public funding in presidential races and the presence of contribution limits in both presidential and congressional contests. Unlike the negative reforms of prior decades, which attempted to prevent abuses by a series of restrictions, limitations and prohibitions, public financing represented a step forward in that it provided an alternative - public funding in presidential campaigns - to less desirable forms of private money.
In 1980, Ronald Reagan’s landslide victory returned the Senate to Republican control for the first time in a quarter of a century. The House remained in Democratic hands, but reform elements there saw little opportunity for change during Reagan’s first term, and campaign finance proposals languished.
It was not until late 1986, when the Democrats recaptured control of the Senate, that campaign finance reform was to move once again to the top of the legislative agenda. By that time, the Republicans, too, had begun to see that certain types of reform might be in their interest. While far apart on solutions, leading legislators in both major U.S. political parties had become increasingly concerned as problems with the federal campaign finance system became more and more apparent.
ISSUES FOR THE 1980s
The failure of Congress to act on campaign finance reform throughout the 1980s can be attributed to the convergence of several political realities. The decade produced no scandal that sparked great public outrage. Numerous legislators in both major political parties did not see reform as being in their electoral self-interest, and the lack of public attention made it easy for them to ignore the issue. Finally, as pressure for change began to grow toward the end of the 1980s, sharp partisan differences between Democrats and Republicans emerged, making compromise elusive.
As Mitch McConnell of Kentucky, the Senate Republicans’ point man on the issue, candidly observed: “Campaign finance is the rules of the game in our democracy, and either side would love to write the rules in a way that benefits them to the detriment of the other side” (Peck 1990, 3).
The following section focuses on the issues that arose in the presidential and congressional systems of political finance during the 1980s, as well as the problems experienced by the Federal Election Commission. It also outlines some proposed legislative solutions.
Presidential Campaigns
Whatever its shortcomings, the U.S. system of public funding of presidential campaigns can claim some degree of success since first being implemented in 1976. During the pre-nomination period (the primary and caucus election process) it has enhanced access to voters by supplementing the treasuries of those candidates with limited name recognition and inadequate financial resources. For example, in 1976, a long-shot aspirant named Jimmy Carter captured both the Democratic presidential nomination and the election. In 1980, Republican George Bush, then relatively unknown to rank-and-file voters despite having held several appointed government positions, mounted an unexpectedly strong challenge to Ronald Reagan. It landed Bush the vice-presidential nomination and put him on the road to the White House.
In addition, the combination of contribution limits and extensive disclosure and compliance requirements has prevented a recurrence of the free-wheeling atmosphere that pervaded the 1972 Nixon campaign. This suggests that the laws of the early 1970s have succeeded in altering the behaviour of candidates, committees and contributors so as to achieve some of the goals of campaign reform.
However, if one views the reforms of the 1970s as an effort to regulate the flow of money into presidential campaigns, it is a regulatory structure in some jeopardy. While the structure worked well when first put into place in 1976, it began to spring leaks during the campaigns of 1980 and 1984; in 1988, major cracks appeared. The problems are attributable less to deficiencies in the law itself than to the inventiveness of political actors in circumventing the statutes and the difficulty of strictly regulating political money in a pluralistic society.
At the outset, it is important to note that the laws governing presidential campaigns have changed little since the adoption of the FECA Amendments of 1974. In the pre-nomination period, a presidential aspirant is limited in how much he or she may receive from any individual contributor ($1 000) or a political action committee ($5 000). PAC donations are not “matchable.” But a candidate may receive public matching funds for each contribution from an individual up to $250. First, the candidate must demonstrate the viability of his or her campaign by collecting $5 000 (in up to $250 amounts) in each of 20 states, for a nationwide total of $100 000. There is a cap on the total amount of public funds available to a candidate during the pre-nomination period; it increases every four years based on the consumer price index (see table 1.2).
Table 1.2 Major-party presidential campaign expenditure limits and public funding, 1976-88
(in millions of dollars)
Source: Citizens’ Research Foundation based on FEC data.
Note: Totals may not be exact due to rounding.
aBased on $10 million plus cost-of-living allowance (COLA) increases using 1974 as the base year. Eligible candidates may receive no more than one-half the national spending limit in public matching funds. To become eligible candidates must raise $5 000 in private contributions of $250 or less in each of 20 states. The federal government matches each contribution to qualified candidates up to $250. Publicly funded candidates also must observe spending limits in the individual states equal to the greater of $200 000 + COLA (base year 1974), or $0.16 x the voting-age population (VAP) of the state + COLA.
bCandidates may spend up to 20 percent of the national spending limit for fund-raising.
cLegal and accounting expenses to insure compliance with the law are exempt from the spending limit.
dBased on $20 million + COLA (base year 1974).
eBased on $0.02 x VAP of the United States + COLA.
fCompliance costs are exempt from the spending limit.
gBased on $2 million + COLA (base year 1974). Under the 1979 FECA amendments, the basic grant was raised to $3 million. In 1984, Congress raised the basic grant to $4 million.
During the general election, the presidential nominee of each major political party receives full public financing. Each candidate receives a flat grant, which may be supplemented by a limited amount of funds spent on his or her behalf by each national political party. With that exception, the two presidential nominees are theoretically barred from raising private funds for their campaigns during the general election. As will be discussed later, these restrictions bear little resemblance to current reality.
Some $500 million was spent on the 1988 presidential campaign, including the pre-nomination period, national conventions and the general election (Alexander and Bauer 1991, 11)7 More than a third of this represents funds provided by U.S. taxpayers (ibid., table 2.6). In return for this public subsidy, presidential candidates agreed to abide by expenditure limitations in the pre-nomination and general election periods and to limit use of their personal assets (as noted in Buckley v. Valeo in the last section). The expenditure ceilings also are indexed to inflation; consequently, the spending limits, as noted in table 1.1, more than doubled between 1976 and 1988.
This, however, has not discouraged candidates and their operatives from devising increasingly imaginative means to get around these ceilings - so much so that they have become largely meaningless. There is no better example than the 1988 presidential campaigns, when Democrat Michael Dukakis and Republican George Bush each helped to raise half again as much money as the general election limit defined by law (Alexander and Bauer 1991, table 3.4, 41).
To some extent, the problem of compliance with expenditure ceilings in U.S. presidential elections mirrors the 1988 Canadian campaign, when the expenditure limits on political parties were undermined by the so-called political interest groups - which spent freely in connection with the debate over the U.S.-Canada Free Trade Agreement. In the United States, the first major holes in the spending limit dike appeared during the 1980 presidential election, the second such contest featuring public financing and expenditure ceilings.
The 1980 Campaign
Yet another major element of the Buckley decision involved “independent expenditures.” The decision made clear that such activity by individuals or groups was a constitutionally protected form of free speech as long as the spending was truly independent. Consequently, independent expenditures could not be coordinated with candidates or their organizations or consented to by candidates or their agents, but they could be spent on behalf of or against a non-cooperating candidate.
The result was the creation of several independent expenditure groups in the late 1970s, the most prominent of which were strongly conservative and pro-Republican. In 1980, most of their efforts were devoted to electing Ronald Reagan. To illustrate the degree to which this device undercut spending limits, Reagan was limited to a total of $51.7 million during the pre-nomination and general election that year. However, according to Federal Election Commission data, independent expenditure campaigns spent another $12.5 million promoting Republican presidential candidates that year, most of it on Reagan’s behalf.8 One aspect of independent spending totals requires explanation. Not all such spending is for direct campaigning by means of communicating with voters; totals also include fund-raising and administrative costs of the political committee undertaking the independent expenditures.
Meanwhile, Reagan’s own advisers came up with another way around the expenditure limits: the “presidential PAC.” After losing his bid for the Republican presidential nomination to Gerald Ford in 1976, Reagan started a PAC ostensibly to contribute money to conservative candidates at the state and local levels. However, its true purpose was to promote Reagan himself as he prepared for another run for the presidency in 1980. As Anthony Corrado has said, “most of the PAC’s funds were used to hire staff and consultants, develop fund-raising programs, recruit volunteers, subsidize Reagan’s travel and host receptions on his behalf” (Corrado 1990).
The object of the PAC was to get around provisions of the Federal Election Campaign Act dictating that once a person declares his or her intention to run for president and registers a principal campaign committee with the FEC, the meter begins running on the pre-nomination expenditure ceiling. There is another advantage to the presidential PAC, since used by many other candidates: an individual donor is permitted to contribute five times as much money to a PAC ($5 000 maximum) as to a presidential or congressional candidate’s campaign committee ($1 000 limit).
The 1984 Campaign
Just as Reagan found ways around the spending limits during the 1980 pre-nomination process, so did former Vice-President Walter Mondale in winning the Democratic Party nomination four years later.
Besides agreeing to overall expenditure ceilings in the pre-nomination process, candidates receiving public funding must abide by a complex series of state-by-state limits, based on population size. These have proved to be highly constraining in an era in which several state primary elections are often held on the same day, and candidates for a party’s nomination must depend on high-cost television rather than personal campaigning in many states. The limits also have proved troublesome for candidates in small states that hold high-stakes contests early in the pre-nomination process.
The result has been a continuing series of subterfuges to evade a particular state’s spending limit. For example, candidates have felt compelled to throw tremendous resources into New Hampshire, which traditionally has been the site of the first presidential primary election. Given the state’s relatively small population and its correspondingly low spending limit, candidates have used such strategies as buying time on Boston TV stations - which reach more than three-quarters of New Hampshire’s population - and charging the cost partially to the Massachusetts limit rather than wholly to the New Hampshire limit. Candidates campaigning in western New Hampshire have been known to spend the night in Vermont, allowing them to charge lodging costs for themselves and their staffs against the Vermont limit.
In 1984, the Mondale campaign sought to escalate this creative accounting through a device known as the “delegate committee.” A study of existing law by Mondale’s legal staff uncovered a 1980 FEC decision permitting those seeking to become national convention delegates to raise and spend money on their own behalf for such grassroots activities as brochures, buttons and bumper stickers (Germond and Witcover 1985, 226). These delegate committees had to operate independently of a national presidential campaign effort.
At the time, the Mondale campaign was fast approaching the prenomination spending ceiling. Compounding the problem was the fact that many of Mondale’s most reliable supporters had “maxed out” by giving the campaign the $1 000 limit on individual contributions. High-ranking Mondale campaign officials saw the delegate committees as a way around both the contribution and spending limits.
There was a second major factor behind creation of the delegate committees. Mondale, in an effort to free himself from criticism that he was too close to many of the Democratic Party’s “special interest” groups, had declared that he would not accept PAC donations. However, a top Mondale campaign official quietly informed the delegate committees by memo that because they were theoretically independent of the Mondale campaign, they could accept PAC money (Germond and Witcover 1985, 229). Organized labour, which had endorsed Mondale, proceeded to contribute substantial amounts of PAC dollars to the delegate committees.
When stories about these committees surfaced in the media, they unsurprisingly prompted criticism that Mondale was flouting the spending limits. The controversy became so intense that Mondale ordered the delegate committees shut down in late April 1984. By then, however, he was well on his way to becoming the Democratic Party nominee.
In May 1984, the FEC found “reason to believe” that the Mondale campaign was in violation of the law because the delegate committees were not functioning in a truly independent fashion (Germond and Witcover 1985, 273). The Commission’s decision was not disclosed until 27 November, after the general election. At that time, it also was announced that negotiations between the FEC and the Mondale campaign had produced an agreement in which the latter paid the federal government almost $400 000 to resolve the matter.9
The 1988 Campaign
The fourth presidential campaign held since the passage of the 1974 amendments witnessed an escalation of the efforts to skirt the spending limits. Because 1988 was the first election since the reforms in which an incumbent president was not running, there were hotly contested battles for the nominations of both major political parties, and this was reflected in the increase in spending. Although the rate of inflation between 1984 and 1988 was only 13.5 percent, total presidential campaign costs rose by 54 percent during that period (Alexander and Bauer 1991, 11).
Use of the presidential PAC reached new highs. In fact, presidential PAC spending for 1988 was more than twice the combined amounts expended in advance of the 1980 and 1984 elections (Alexander and Bauer 1991, 15). Another well-worn way around the presidential limits - independent expenditures - declined somewhat between 1984 and 1988. Nonetheless, they still played a crucial role in the general election campaign. Michael Dukakis’ campaign was hurt by explosive ads highlighting a felon named Willie Horton, who, while on a prison furlough program in Massachusetts, had escaped and brutally raped a Maryland woman. These commercials, designed to question Dukakis’ record on crime, were produced and aired not by the Bush campaign, but by two independent expenditure groups, and were widely shown on television news programs (ibid., 86-87).
But the most controversial element in the financing of the 1988 presidential campaign was a device that has come to be known in the American political vocabulary as “soft money.” In contrast to “hard money” regulated by the FECA, soft money was subject to neither the limits nor the disclosure requirements of federal law. In the context of major political parties, soft money refers to funds channelled to state and local party organizations for voter registration and get-out-the-vote efforts. These state and local party affiliates are outside the reach of federal law.
Because soft money has been raised primarily by officials of presidential campaigns, critics charge that it is benefiting presidential candidates while undermining the spending limits imposed on them. Because presidential candidates themselves have helped to raise this money, it raises questions about whether they are violating the legal provisions by which - in return for public subsidies - they agree to strict limits on private fund-raising during the general election. Finally, because soft money permits the collection of unlimited donations from individuals, critics say it is a throwback to the days of the very large contributor.
Soft money has been present in presidential campaigns throughout the 1980s. What distinguished 1988 from past elections was its quantity. During the 1988 general election, more than twice as much soft money was expended as during the 1980 and 1984 general elections combined.
In 1980 and 1984, the Republicans had far outstripped the Democrats in raising soft money. The Republicans raised $15 million in both elections while the Democrats were only able to raise $4 million in 1980 and $6 million in 1984 (Citizens’ Research Foundation). That changed dramatically in 1988 when the Dukakis campaign raised $23 million, and a Republican response produced $22 million in soft money for the Bush campaign.
This money was raised frantically, as if no public funding or expenditure limits existed, and it was raised in large individual donations far in excess of federal contribution limits. The Republicans claimed 267 contributors of $100 000 or more; the Democrats counted 130 individuals who donated or raised amounts in six figures (Houston 1988).10 This return of the very large contributor seriously eroded the concept behind the presidential funding structure embodied in the FECA Amendments of 1974. Public funds were intended to provide most or all of the money serious candidates needed to present themselves to the electorate, yet soft money offers a pathway into presidential politics for direct corporate and labour donations; the former was barred at the federal level in 1907 and the latter in 1943. But 30 states permit direct corporate contributions, and 41 allow direct labour contributions. Therefore, a donation can be directed by a party’s national committee from, say, a corporation in a state that bars corporate contributions to a state party committee in a state that allows corporate donations.
Soft money is not the only form of disbursement in presidential campaigns that is spent outside the general election limits. As table 1.3 illustrates, while the spending limit was $54.4 million (federal grants of $46.1 plus national party spending of $8.3 million), the amounts actually spent by or on behalf of the major-party candidates totalled $93.7 million for Bush and $106.5 million for Dukakis. In addition to state and local party spending (soft money), labour unions spent $30 million in parallel campaigning; this amount consisted of voter registration and turnout expenses as well as partisan communication costs to their memberships. Most of this benefited the Dukakis campaign. Other costs outside of the candidate limits and labour spending included minimal corporate spending, candidate compliance costs and independent expenditures. Some of these various costs can be legally controlled by the candidates, some can be coordinated by the campaigns, some are limited, but others cannot be controlled, coordinated or limited.
Table 1.3 Sources of funds, major-party presidential candidates, 1988 general election
(in millions of dollars)
Source: Citizens’ Research Foundation.
aincludes money raised by the national party committee and channelled to state and local party committees.
bIncludes internal communication costs (both those in excess of $2 000, which are reported, as required by law, and those less than $2 000, which are not required), registration and voter turnout expenditures, overhead and other related costs.
cDoes not include amounts spent to oppose the candidates: $2.7 million against Dukakis,$77 325 against Bush and $63 103 against Quayle.
Legislative Proposals
The experience of the 1988 presidential campaigns led to numerous proposals during the 1989-90 session of Congress to restrict soft money. The House and Senate, both under Democratic control, passed soft money restrictions as part of comprehensive legislation. But differences between the two bodies prevented either campaign reform bill from becoming law before the 101st Congress adjourned in October 1990. (See following section, “The Debate over Legislative Proposals”.)
Both bills aimed to prevent a recurrence of the tactics used by the presidential campaigns in 1988. The House legislation would have barred presidential candidates from raising soft money. The Senate proposal would have placed under the limits of federal law all contributions solicited by a national party committee on behalf of a state party organization, thereby curtailing the $100 000 gifts raised in 1988. Both bills also would have sharply restricted the amount of money that a state party could spend on so-called generic campaigns in connection with a presidential race, including voter registration and get-out-the-vote drives.
But the Senate bill went further by placing strict spending limits on generic campaign activities by state and national party committees even when presidential and congressional candidates are not specifically mentioned. In the less stringent House approach, generic campaign efforts that made no mention of federal candidates were left outside the purview of federal law, even if a presidential or congressional candidate might realize some benefit from them.
Both bills would have required disclosure of soft money receipts and expenditures. The FEC passed regulations that went into effect 1 January 1991; these required disclosure and set allocation formulas for generic spending on behalf of the party ticket that may affect the election of federal candidates (Federal Register 1990).11
Meanwhile, Senate Republicans wanted restrictions on non-party money. They proposed to prohibit tax-exempt organizations from activities on behalf of a particular candidate. This was aimed at organized labour as well as a number of other issue-oriented groups - such as environmental organizations - that have tended to favour Democratic presidential and congressional candidates with various forms of assistance.
In seeking to regulate another device used to skirt campaign spending limits - independent expenditures - the Democrats and Republicans found more common ground. The reason is that legislators in both parties are clearly nervous about becoming victims of the stridently negative advertising that often has characterized independent campaigns. Although the Buckley decision found independent expenditures to be a protected form of free speech, both parties in Congress have looked for constitutional ways to discourage them.
The House-passed campaign bill would have required any television advertisement underwritten by independent expenditures to contain a continuously displayed statement identifying the sponsor of the ad. The Senate bill proposed that any broadcaster selling air time to an independent campaign favouring one candidate would then have to sell air time to the other candidate to allow him or her to respond immediately.
The Future of the Presidential Checkoff
While private money has found several channels into presidential campaigns, the flow of available public funding is in danger of slowing to a trickle. It now appears that the Presidential Election Campaign Fund will face severe cash flow problems as early as the 1992 campaign and will be in a deficit situation by the 1996 race unless action is taken.
The $1 federal income tax checkoff has not been increased since its enactment in the Revenue Act of 1971, despite the fact that the U.S. dollar is worth about a third of what it was then. Compounding the erosion of the dollar is the eroding support for the checkoff from taxpayers. According to the Federal Election Commission, there has been a 30 percent decrease in taxpayer support for the checkoff since 1980, when checkoff participation was at an all-time high. This translates into tax checkoff rates declining from the high point of 28.7 percent in 1980 tax returns to 20.1 percent in 1988 returns; the 1989 rate on 1988 returns produced $32.3 million - the yearly amounts being aggregated over a four-year period for payouts in presidential election years (Federal Election Commission 1990b). This parallels the drop in checkoff participation in several states (notably New Jersey, Michigan, Minnesota and Wisconsin) that provide public funding to statewide and/or state legislative candidates.
Herein lies a paradox of the U.S. political system: while surveys indicate many voters are convinced that elected officials are being bought off by special interest money, these same voters have shown considerable reluctance to provide the public funding necessary to replace it. Some insights into this conundrum are provided by a series of focus groups sponsored by the FEC in late 1990. The private research firm conducting focus groups reported: “It was often difficult to keep the group focused on the subject at hand (the checkoff) because of their anger at politicians and a perception of wasteful spending by government. Their anger associated with these concerns contaminated their consideration of presidential funding” (Babcock 1991).12
The FEC announced in late November 1990 that the presidential public funding program could suffer a cash flow problem during the 1992 presidential race (Campaign Practices Reports 1990, 2). To deal with this, FEC and U.S. Treasury officials are currently discussing two plans that would translate into candidates receiving less than the traditional dollar-for-dollar public match on private contributions during the prenomination period. Because restricting the availability of public funding in the early going could benefit better-known candidates, the FEC and Treasury are expecting any decision they make to face political and legal challenges.
Both alternatives being considered would require the use of checkoff money collected in 1992. That, in turn, would further worsen the deficit projected for the 1996 presidential year. While the FEC is stepping up efforts to educate taxpayers about the checkoff, several commission members said recently that Congress will have to decide whether to make a one-time grant to keep the fund out of debt or totally scrap the checkoff in favour of providing public funding through continuing legislative appropriations - a perilous possibility given U.S. budget deficits (Campaign Practices Reports 1990, 3).
Congressional Campaigns
The structure of the law under which members of Congress themselves must stand for election is a hybrid fashioned by legislative and judicial fiat and by FEC regulations and opinions. The absence of public funding for congressional candidates means that there has been no carrot with which to bring about voluntary acceptance of spending limits in House and Senate contests. Reformers subsequently sought to remedy this by lobbying Congress to create a system of expenditure limits and public funding similar to the presidential model. But 15 years after the Supreme Court linkage, Congress has yet to enact such legislation.
Table 1.4 Congressional campaign expenditures, 1972-90
(in millions of dollars)
Source: Citizens’ Research Foundation compilation based on FEC and other data.
A very sharp escalation has occurred in spending on contests for Senate and House seats. table 1.4 shows an increase in total spending from $77.3 million in the 1972 election cycle to $445.2 million in the 1990 cycle. There are 435 House seats elected every two years, and in the aggregate these are costlier than the 33 or 34 Senate seats elected every two years.
Even taking inflation into account, total expenditures in congressional campaigns showed a 160 percent increase between 1976 and 1988 when considered in constant dollars, according to FEC figures. The erosion of the dollar has been such that the $1 000 maximum individual contribution dropped about 60 percent in value between 1975 and 1988 when considered in constant dollars. At the same time, congressional candidates have increasingly pursued the PACs, whose maximum contribution per candidate each election is a higher $5 000.
The combination of escalating campaign costs and diminished participation by individual contributors has given rise to complaints that political challengers are being priced out of the market, while incumbent members of Congress are remaining in office by relying excessively on special interest donations. These two concerns are interwoven through several of the issues that have arisen during the campaign finance reform debate of the late 1980s.
The Rise of PACs
According to FEC figures, there were 608 PACs in existence at the end of 1974, when amendments to FECA loosened restrictions on their formation. By 1990, the number stood at 4 192, almost a sevenfold increase in 16 years. The sharpest increase came among corporate PACs, whose number jumped from fewer than 100 in 1974 to almost 1 800 in 1990 (Federal Election Commission 1990a, 1). There was a surge of new issue and ideological PACs in the early 1980s, but the total numbers have levelled off or even decreased in some categories, as shown in table table 1.5.
What particularly disturbs many advocates of reform is the increasing dependence of House and Senate candidates on PACs. PAC donations accounted for 24 percent of the contributions to Senate candidates and 40 percent of the contributions to House candidates during the 1987-88 election cycle; a small downturn to 22 percent in Senate campaigns and 38 percent in House campaigns occurred in the 1989-90 cycle. The growth of PAC contributions to Senate and House candidates over the years is shown in table 1.6.
In contrast, PACs play a relatively minor role in presidential contests. In 1988, these groups accounted for only 1.4 percent of all funding during the pre-nomination period, and four candidates during that period declined to accept PAC money (Alexander and Bauer 1991, 25).
Table 1.5 Growth of Political Action Committees, 1974-90
Source: Federal Election Commission.
* This category includes trade associations, membership and non-connected (so-called ideological)
Table 1.6 PAC contributions to congressional candidates, 1976-90
(in millions of dollars)
| Year | Amount |
| 1976 | 22.6 |
| 1978 | 34.1 |
| 1980 | 55.2 |
| 1982 | 83.6 |
| 1984 | 105.3 |
| 1986 | 132.7 |
| 1988 | 151.2 |
| 1990 | 150.6 |
Sources: Common Cause (1976); Federal Election Commission (1978-90).
Because many PACs are tied to powerful corporations, trade associations and unions with legislative interests in Congress, critics charge that wholesale vote buying is occurring. Such charges clearly overstate the case; studies of congressional behaviour have indicated that personal philosophy, party loyalties and an aversion to offending voting constituents are more influential factors than campaign contributions in determining the positions taken by members of Congress.
PACs, however, have created further perceptual problems at a time when Congress already is held in low regard by the American public. If PACs have not spawned vote buying, they have created a system in which money and access to legislators have become intertwined. Not only have reformers criticized PACs but so has the Republican congressional leadership in recent years, culminating in President Bush’s call for their elimination in his 1991 State of the Union address. This is ironic in view of the Republican record in the 1970s and early 1980s championing business PACs and encouraging their establishment. It was not until business PACs started to give more to Democratic incumbents that Republicans turned against PACs, at least in their rhetoric -they still accept PAC gifts.
PACs have their defenders, who argue that they merely represent the series of competing interests that are an inherent part of the U.S. pluralistic political system; they are hardly monolithic as portrayed. At a time when many bemoan declining citizen involvement in the electoral process, proponents argue that PACs have increased participation by their rank and file.
Finally, they contend that efforts to do away with PACs in congressional races would be as ineffective as the attempt to impose expenditure ceilings in presidential races: PAC money would not disappear but would simply be channelled into less visible, less traceable channels such as soft money and independent expenditures.
Advantages of Incumbency
If reformers believe PACs are inherently corrupting, leading Republicans in Congress have targeted them for very different reasons. The Republicans complain that PAC patterns of contributions in recent years have shown a distinct bias towards incumbent legislators, a significant majority of whom are Democrats.
PACs have become a lightning rod in the debate over whether the advantages of incumbency have become excessive. Most House turnover in recent years has come through retirement, death, members running for higher office, and the redistricting following the decennial census rather than through incumbents being defeated by challengers.
In 1984, when Republican Ronald Reagan won re-election to the presidency in a landslide over Democrat Walter Mondale, the re-election rate of incumbents in the overwhelmingly Democratic House was 96 percent. In 1990, predicted by many to be a year in which a doubting public would turn on incumbents, the re-election rate again was 96 percent. In some years, it has exceeded 98 percent.
Traditionally, the greater prestige and visibility of Senate seats have made them more attractive to political challengers. Even when the odds of defeating an incumbent have been small, well-funded, credible opponents often appeared - hoping for an upset or to use a strong electoral showing as a springboard to a future race for office. However, in the past two elections, there have been increasing signs that the lack of competitiveness affecting House races is seeping into Senate contests as well.
While some political scientists have concluded from the high re-election rates that there exists a “Permanent Congress,” in fact, two-thirds of the House has served fewer than 12 years (Edwards 1990), and senators have experienced a 44 percent turnover rate over a nine-year period (Swift 1989).
In 1988, the average winning Senate campaign cost more than $4 million, while many challengers failed to raise even a third of that amount (Makinson 1989, 21). In 1990, of the 31 Senate incumbents seeking re-election, four had no opposition whatsoever and another 11 faced challengers who never presented a credible financial or political threat. Again, in a year in which incumbents were thought to be in disfavour, only one sitting senator was defeated, by a challenger who was out-spent 8-1.
The failure of legislative challengers to attain financial competitiveness comes in the face of demonstrations by political scientist Gary Jacobson that money is a much more important campaign resource for non-incumbents than for incumbents (Jacobson 1980, 48-49). And the failure comes at a time when PACs are playing an increasingly important role in funding incumbents’ campaigns. According to the FEC, 57 percent of PAC donations went to incumbents during the 1977-78 election cycle; a decade later, that figure had jumped to 74 percent.
Of course, labour PACs supported congressional Democrats strongly throughout this period, including substantial financial assistance to many Democratic challengers. What has angered the Republicans is that business and trade association PACs have shifted their loyalties more and more towards the Democrats. In 1988, 55 percent of business PAC money was funnelled to Democrats, mostly to incumbents. Just six years earlier, Republican congressional candidates got 60 percent of business PAC dollars (Makinson 1989, 15).
The Republicans, a minority in both houses of Congress, contend that their inability to field competitive challenges to Democratic incumbents in many instances is due to a lack of financial support from, among others, the business PACs. In turn, the PACs say that the Republicans often have failed to recruit credible challengers to begin with.
Among the advantages of incumbency are not only the attracting of PAC contributions - in part because of incumbents’ use of their legislative committee memberships as bases for fund-raising - but also the franked mail privilege, generous staffing including in home-state or district offices, travel, honoraria, and incumbent-dominated safe districts achieved through decennial reapportionment.
The Costs of Television
The chasing of PAC money, along with the frequent complaints that legislators are paying too much attention to fund-raising and not enough to legislating, are both by-products of the escalating costs of Senate and House campaigns. The professionalization of politics has given rise to computerized campaign headquarters featuring sophisticated and expensive strategies for targeting potential voters and contributors. However, television is repeatedly pointed to as the culprit behind the increasing costs of running for Congress.
Of course, paid television plays a major role in presidential campaigns. But the price tag has been less of an issue, for several reasons. First is the presence of alternative resources in the form of public financing. With soft money increasingly bearing the expense of such nuts-and-bolts activities as voter registration and get-out-the-vote drives, it has left general candidates free to use much of their public subsidy for television advertising. To a considerable extent, the general election public funding to presidential candidates has turned into an income transfer from the U.S. Treasury to private broadcasters.13 Meanwhile, during the pre-nomination period, state-by-state expense limits and the need to marshal scarce financial resources have limited the use of television. In 1988, television accounted for only 6 percent of all presidential pre-nomination spending (Alexander and Bauer 1991, 35).
At the congressional level, the role of television and its attendant costs have been overstated to a degree. In many House contests, particularly in densely populated urban and suburban areas, the boundaries of a House district are rarely contiguous with the viewership of a broadcast station. There are some 40 congressional districts within the viewing range of New York City stations: some are in New Jersey, some in Connecticut and some in New York. Consequently, it makes little sense to purchase expensive television time to reach many people unable to vote in that district. In these instances, carefully targeted direct mail has been the medium of choice in communicating with voters. In Senate races, which are run statewide, the expense of television is far greater, sometimes as much as 50 percent of the campaign spending.
The federal law governing broadcast stations does not require TV outlets to sell air time to candidates. Section 315 of the Federal Communications Act of 1934 (the so-called equal time rule) mandates that if one candidate uses a broadcast station, that licensee must provide equal opportunities for all candidates for the same office (whether federal, state or local); this applies to both purchased and free time.
Another part of the law, section 312(a)(7), however, warns that a broadcast station’s licence may be withdrawn for “willful or repeated failure to allow reasonable access to or to permit purchase of reasonable amounts of time for use of a broadcasting station by a legally qualified candidate for federal office on behalf of his candidacy.” But this does not necessarily translate into the sale of broadcast time; the requirement may be fulfilled by the station’s sponsorship of debates or other forums.
In 1972, an amendment to the Federal Communications Act (section 315(b)) mandated that broadcast stations cannot charge political candidates more than the lowest unit rate made available to any other advertiser in the same class of time. The rule, which governs the period 45 days prior to a primary election and 60 days prior to a general election, was designed to insure that political candidates received the same discounts as a station’s most favoured advertisers.
Some broadcasters, however, have succeeded in frustrating the intent of the rule by selling advertising time on a pre-emptible basis. Because political candidates are advertisers who want time that is not pre-emptible, the “lowest unit rate” for this kind of advertising often has ended up being the highest rate charged by the station. Consequently, critics have complained that the law has done little to hold down political costs.
The Role of Parties
As with many other concerns, the role of the political parties is one that transcends strictly financial issues.
The reforms of the early 1970s sharply curtailed the financial involvement of political parties in both presidential and congressional campaigns, thereby leading to a further weakening of these structures. As noted in the first section, several provisions of the FECA Amendments of 1979 were designed to respond to these concerns regarding presidential campaigns. In addition, there have been suggestions that the limited ability of the two major parties to finance congressional campaigns has led to diminishing partisan loyalties on the part of legislators, making it increasingly difficult to mobilize votes in Congress.
However, the weakening of the political parties predates the appearance of campaign finance reform on the congressional agenda. To some degree, U.S. political parties have fallen victim to a more educated, more transient, more independent-thinking electorate. Television also has played an important role. Congress has been populated increasingly by non-traditional politicians who, rather than rising through the ranks of political parties, have ignored party structures and used some form of media to get their messages directly to the voters.
In short, parties have lost a great deal of their effectiveness, with many of their functions absorbed by other institutions or left unfulfilled. What the reforms in the political process, including political finance laws, have done is to give rise to a number of institutions, such as PACs, providing candidate support and dialogue with the community. These changes are so basic that it is doubtful that any legislation could succeed in reversing them.
The proposals to reinvigorate parties have, in part, been a response to the rapid growth of PACs. Advocates of this approach argue that channelling money to congressional candidates through political parties, which collect it from a variety of sources, is more desirable than the one-to-one dependence on special interest PACs. The reforms of the 1970s placed strict limits on the amounts of money that national, state and local party committees could give directly to a particular candidate (see table 1.1).
The framework of the law, however, did permit coordinated expenditures under which national and state party committees could pay for certain expenditures undertaken by the candidate. The allowed amount of coordinated expenditures is based on a formula of two cents per voting age population, plus cost-of-living adjustments. In 1990, these expenditures could amount to large sums - as much as $2 million in a California Senate race - and as little as $100 560 in the smallest states. The House limit was $50 280 (see table 1.7). These amounts, which may or may not be spent on specific contests according to the availability of money and candidate need, are disclosed as disbursements by the giving committee(s) but not by the candidates on whose behalf the payments are made; accordingly, the actual costs of some Senate or House campaigns are understated, even in tabulations made by the FEC.
The question of what role to give the parties is not without significant partisan motives. The Republicans, whose national party committees have regularly raised more funds than their Democratic counterparts by wide margins in recent years, would like to substantially loosen - if not altogether remove - the current contribution limits and coordinated expenditure limits on party spending in congressional races. Unsurprisingly, the Democrats, who have had trouble matching the Republicans in terms of party money channelled to congressional contests through either means, are leery of such proposals.
Table 1.7 Party spending limits — Senate elections, 1990
| State | Voting age population | 1990 party spending limits ($) |
| Alabama | 3 010 000 | 151 343 |
| Alaska* | 362 000 | 50 280 |
| Arizona | 2 575 000 | 129 471 |
| Arkansas | 1 756 000 | 88 292 |
| California | 21 350 000 | 1 073 478 |
| Colorado | 2 453 000 | 123 337 |
| Connecticut | 2 479 000 | 124 644 |
| Delaware* | 504 000 | 50 280 |
| Florida | 9 799 000 | 492 694 |
| Georgia | 4 639 000 | 233 249 |
| Hawaii | 825 000 | 50 280 |
| Idaho | 710 000 | 50 280 |
| Illinois | 8 678 000 | 436 330 |
| Indiana | 4 133 000 | 207 807 |
| Iowa | 2 132 000 | 107 197 |
| Kansas | 1 854 000 | 93 219 |
| Kentucky | 2 760 000 | 138 773 |
| Louisiana | 3 109 000 | 156 321 |
| Maine | 917 000 | 50 280 |
| Maryland | 3 533 000 | 177 639 |
| Massachusetts | 4 576 000 | 230 081 |
| Michigan | 6 829 000 | 343 362 |
| Minnesota | 3 224 000 | 162 103 |
| Mississippi | 1 852 000 | 93 119 |
| Missouri | 3 854 000 | 193 779 |
| Montana | 588 000 | 50 280 |
| Nebraska | 1 187 000 | 59 682 |
| Nevada | 833 000 | 50 280 |
| New Hampshire | 828 000 | 50 280 |
| New Jersey | 5 903 000 | 296 803 |
| New Mexico | 1 074 000 | 54 001 |
| New York | 13 600 000 | 683 808 |
| North Carolina | 4 929 000 | 247 830 |
| North Dakota* | 481 000 | 50 280 |
| Ohio | 8 090 000 | 406 765 |
| Oklahoma | 2 371 000 | 119 214 |
| Oregon | 2 123 000 | 106 744 |
| Pennsylvania | 9 199 000 | 462 253 |
| Rhode Island | 767 000 | 50 280 |
| South Carolina | 2 558 000 | 128 616 |
| South Dakota* | 519 000 | 50 280 |
| Tennessee | 3 685 000 | 185 282 |
| Texas | 12 038 000 | 605 271 |
| Utah | 1 076 000 | 54 101 |
| Vermont* | 425 000 | 50 280 |
| Virginia | 4 615 000 | 232 042 |
| Washington | 3 545 000 | 178 243 |
| West Virginia | 1 394 000 | 70 090 |
| Wisconsin | 3 612 000 | 181 611 |
| Wyoming* | 339 000 | 50 280 |
Source: Federal Election Commission.
* States with only one representative.
The FEC under Fire
The Federal Election Commission is a controversial agency (Jackson 1990; Common Cause 1989). It has been roundly criticized for being too harsh, too lenient, too autocratic, too ineffective, too inconsistent and too insensitive to First Amendment rights as well as to the plight of non-incumbent candidates and grassroots groups.
The Commission was charged with administering the FECA, disbursing public funds to presidential candidates, enforcing the expenditure and contribution limits, and providing comprehensive disclosure of political receipts and expenditures. Observers believe the FEC is or should be at the centre of campaign finance reform. But the FEC looks over its shoulder continually for fear Congress is watching - and would disapprove. As a result, the Commission is less able to carry out its central responsibility to make the Federal Election Campaign Act - with its wide scope and extreme complexities - work smoothly and fairly. The Commission has not found a commanding vision that would give the FECA credibility and widespread acceptance.
The Federal Election Campaign Act vests the Federal Election Commission with its authority and designates its responsibilities regarding federal election practices. Although the FEC has jurisdiction over civil enforcement of federal political finance laws, it does not have formal authority to act as a court of law. Like other regulatory agencies, it cannot compel a party into a conciliation agreement, to admit a violation or to pay a fine. The Commission can levy a fine upon a party voluntarily participating in conciliation, or it can pursue litigation in the courts. Nonetheless, complaints regarding federal elections must first be approved by a majority of the six-member FEC; only later can redress and non-voluntary compliance be sought through litigation, or through referral to the attorney general. The fact that the FEC membership is divided equally between the two major parties sometimes has made a majority difficult to obtain.
The agency has had to spend considerable time and resources defending itself, often at the expense of administration and enforcement of the law. Budgets are not keeping up with inflation. The constant drumfire of criticism has sapped much of the Commission’s vigour, strength and support.
A major criticism of the FEC is that it exercises its enforcement powers too selectively, resulting in unjustified costs and burdens on campaigns that must now employ lawyers and accountants to ensure compliance.
Defenders of the Commission contend that many of the criticisms are unfair because the agency is required to follow the law enacted by Congress and is too often blamed for merely implementing the law. In this view, the fault may lie in the law, but the FEC gets the static. The continuing objections to most facets of the Commission’s work are bound to inhibit the healthy functioning of the agency - diminishing its moral authority in administering and enforcing the law.
The most approved and respected functions of the FEC are its disclosure activities - including the easy availability of information through its automated facilities in a ground-floor office - and the compilations of political fund data through its computer services. It can be faulted for not more clearly articulating its many accomplishments in this area and sometimes for its slowness in compiling data in meaningful fashion. Of course, budgetary considerations often slow the compilation process.
In fairness, FEC problems spring less from the agency’s shortcomings than from Congress’ reluctance to create a truly independent commission. It is the kind of commission the Congress wants, as is apparent in the congressional influence on appointments to the FEC. That, in turn, is reflected in the occasional failure to deal with major campaign finance issues, including two recent cases in which the Commission acted only after being forced to do so by the federal courts.
In discussing the complexities of the Federal Election Campaign Act,the late Senator Lee Metcalf once wondered whether office holders should not worry about serving time rather than constituents. His quip, seriously considered, suggests the contradictory nature of the reforms, the conflict between the goals their proponents sought to achieve, and the statutory and procedural constraints their implementation has imposed on the democratic electoral process.
Election commissions are mainly an American innovation. Whether federal or state, they have multiple roles as judge, jury, administrator, prosecutor, enforcer and magistrate. The potential for conflict among these roles is as clear as the tensions they invite and threatens good regulation unless the commissions tread cautiously. Serious enforcement of the law must not chill free speech or citizen participation. An expansive enforcement policy produces an unfortunate political climate. On the other hand, a weak enforcement policy does not raise levels of confidence in the electoral process.
The power to interpret the law is essentially the power to make new law, and the commissions sit astride the political process, empowered to influence the outcome of elections. In these circumstances, legislatures have not been reluctant to restrain the agencies. Yet legislatures have a conflict of interest because their members enact the laws under which they themselves run for re-election. Clearly there is no ideal that can realistically be met.
THE DEBATE OVER LEGISLATIVE PROPOSALS
The 1989-90 legislative session was the closest Congress has come to massively overhauling federal campaign finance laws since the 1974 amendments. This time it was a hint of scandal that prodded both the Senate and the House to pass legislation. But two other factors prevented campaign finance reform from becoming law. One was partisanship: both Democrats and Republicans continued to perceive hidden motives behind each other’s legislative proposals. In addition, the long-standing dichotomy between the House and Senate on this issue again emerged. Although both were under Democratic control, the upper and lower houses of Congress were unable to resolve conflicting interests arising from their different approaches to reform.
After a hiatus of more than half a decade, campaign finance reform first resurfaced on the Senate floor in December 1985. Democrat David Boren of Oklahoma and Republican Barry Goldwater of Arizona wanted to reduce the amount a PAC could donate to a candidate. Ironically, most Republicans, who were to embrace such a proposal later, worked to sidetrack this measure. At the time, the Republicans were in control of the Senate and were receiving the majority of donations made by business and trade association PACs.
Democrats regained a majority in the Senate in the November 1986 elections and decided to make campaign finance reform a major issue. Led by Boren, their bill provided direct public financing for Senate candidates who accepted spending limits; also included were aggregate limits on the total amount of money a candidate could accept from all PACs.
A rancorous, eight-month-long debate ensued, in which the Democrats sought without success to shut off a Republican filibuster against the bill. In an unsuccessful attempt to attract Republican support, Boren modified the legislation to provide public funding only to candidates whose opponents exceeded the prescribed spending limits.
Since 1987, Senate and House Democratic leaders have insisted on expenditure limits in congressional races similar to those now in place for presidential campaigns, while Republicans have strongly objected. The issue has become the biggest single obstacle to achieving bipartisan reform.
Many Republicans see spending limits as giving further advantage to incumbent legislators with widespread name recognition at a time when a majority of incumbents are Democrats. Some recent statistics do back up the argument that spending limits could disadvantage challengers. For example, a study by the non-partisan Committee for the Study of the American Electorate found that of 32 winning Senate challengers between 1978 and 1988, only seven stayed within the spending limits proposed by Senate Democrats in 1990 (Peck 1990, 3).
A basic philosophical disagreement also lies behind this dispute. The Democrats insist that rising costs and the escalating money chase cannot be solved unless the total amount of money in campaigns is capped through expenditure limits. The Republicans counter that the chief problem is not the amounts of money, but its sources. They have focused on limiting certain kinds of money considered tainted (i.e., PACs) and replacing it with other sources they regard as more desirable (i.e., donations from individuals and political party money).
The Republicans also oppose public financing, which they tend to regard as an inappropriate use of tax dollars. This is a second major partisan difference between them and the Democrats, although there is by no means acceptance of public financing by all Democrats.
Several factors converged to bring campaign finance reform to the forefront of the legislative agenda when the 101st Congress convened in January 1989. It had become apparent that a bailout of the nation’s savings and loan industry was going to cost several hundred billion dollars. Attention focused on the California-based Lincoln Savings & Loan (S&L). It was revealed that Lincoln’s owner, Charles Keating, and his associates had given $1.3 million to political and semi-political committees associated with five senators who had met with federal regulators on Keating’s behalf.14
Then, House members began moving after the 1988 election to give themselves a substantial pay raise, in order to deal with the issue almost two years before they would again face the voters. A fire-storm of protest erupted, and the move was temporarily shelved. To make the pay raise more palatable, House leaders promised action on ethics and campaign reform measures.
House Speaker Jim Wright of Texas, then the subject of an ethics investigation that would ultimately lead to his resignation, appointed a bipartisan task force on campaign reform in January 1989. House Democrats coalesced around two bills proposing campaign spending limits and aggregate ceilings on PAC donations. The chief difference between the two bills was over public financing, reflecting divisions within the Democratic majority on this issue. One bill sought to achieve voluntary compliance with spending limits in return for discounts on postal rates and television ads; the other included public matching funds.
In the Senate, Boren reintroduced his 1987-88 proposal for public financing of Senate candidates only when an opponent exceeds spending limits. The Republicans, led by Senator Mitch McConnell of Kentucky, countered with a cut in PAC contribution limits, an increase in the amount that could be donated by an individual, and fewer restrictions on the money that political parties could give to candidates.
In June 1989, President Bush offered his own proposal. With the Democrats in control of Congress, it was aimed largely at reducing the advantages of incumbency by doing away with most PACs and forcing candidates to “zero out” campaign treasuries after each election. The latter proposal was designed to end the practice whereby incumbents accumulated large “war chests” in an effort to scare away potential challengers. Not surprisingly, the plan was strongly attacked by the Democrats.
By the end of 1989, the co-chairmen of the House task force, Democrat Al Swift of Washington and Republican Guy Vander Jagt of Michigan, reached agreement on some secondary issues. These included guaranteeing priority for political candidates in the purchase of broadcast time, re-establishing tax credits for small donations and doing away with leadership PACs.15 But, on the major issues - expenditure limits, public funding, PACs and the role of parties - sharp partisan divisions remained.
Just as ethics problems had placed pressure on House Democrats to act on campaign reform in 1989 (ethics controversies forced both Wright and Majority Whip Tony Coelho from office), the Senate came under similar pressure in 1990 as a result of a decision by the Senate Ethics Committee to investigate the five senators involved in the Keating S&L affair. In an effort to avoid a repeat of the 1987-88 battle, the two Senate leaders - Democrat George Mitchell of Maine and Republican Robert Dole of Kansas - named a panel of academic and legal experts to come up with possible solutions.
The panel’s recommendations, released in early March, were initially hailed by both political parties as the basis for a possible compromise (Campaign Finance Reform Panel 1990).16 The panel proposed what became known as “flexible spending limits.” Exempt from these limits would be relatively small contributions to Senate candidates from in-state residents, along with spending by political parties for research, voter-registration drives and get-out-the-vote efforts.
The panel sought to compromise between the Democrats’ insistence on spending limits and the Republicans’ contentions that the chief problem is the source of campaign money. While maintaining a form of expenditure ceilings, the proposal favoured political party contributions and individual donations from voting constituents over PACs and out-of-state individuals - both regarded as major sources of special interest money. In addition, the panel did not recommend direct public financing, an idea strongly opposed by the Republicans. Rather, it suggested reduced broadcast rates and postal discounts combined with tax credits for in-state contributions as incentives for candidates to abide by spending limits.
The political opening created by the panel’s report was soon lost amid posturing by Senate Democrats and Republicans, both eager to be seen by voters as wearing the mantle of reform. Although there were also internal differences within each party, the Democrats and the Republicans formulated separate bills as possible substitutes to one that had been reported out favourably by a Democratic-controlled Senate committee.
The Democratic-sponsored bill that passed the Senate in August 1990 proposed that candidates who comply with spending limits be given vouchers with which to buy television time along with discounted mail rates. The Senate legislation also would have provided direct public funding to participating candidates whose opponents exceeded the spending limit in a particular state. The House Democratic bill included free television time and mail discounts. But, reflecting scepticism on the part of some House Democrats regarding the ability of the FEC to administer a program of direct public funding for congressional candidates, the House bill did not provide for such a program.
Another issue to split Democrats and Republicans was how to regulate PACs. In general, the Senate and House Democrats differ on reducing PAC contribution limits or prohibiting PAC contributions entirely, but both have favoured aggregate ceilings on the total any candidate can accept from all PACs. Some Republicans have proposed reducing the current $5 000 per election limit that a PAC is allowed to give to a candidate, while others want to ban PAC contributions entirely. Proposals to reduce contribution limits seem aimed at the Democratic-leaning labour PACs and certain other membership PACs, which have tended to contribute the maximum allowed under law. Some have complained that the Democratic proposals for aggregate limits would enable a candidate to accept large amounts of early “seed money” from well-endowed PACs, thus preventing the smaller PACs from contributing at all if the candidate reached the limit early.
Two provisions faced almost certain judicial challenges if the Senate package had become law: a ban on PACs and a system of contingency public financing. In fact, the Senate bill contained a stand-by scheme for limiting PAC contributions in the event that the ban on PACs was found to be unconstitutional. (Besides corporate, trade association and union PACs, the prohibition included covered “non-connected” or ideological or issue PACs, a move potentially in conflict with constitutional rights.) During the Senate debate, contingency public funding was challenged as a coercive measure because it serves to punish a free-spending candidate by giving public money to his or her opponent.
The House bill, passed several days after the Senate legislation, emerged only after fierce infighting among House Democrats. Those from states likely to lose districts as a result of the 1990 decennial census feared that spending limits would harm their chances for political survival. To satisfy them, the spending limits were loosened for House candidates who survived primary elections with less than two-thirds of the vote. Those complying with the limits were to be rewarded with broadcast and postal discounts.
In contrast to the Senate ban on PACs, the House-passed bill allowed candidates to accept an aggregate amount of PAC contributions equal to half of the spending limit. This clearly reflected House Democratic dependence on PACs: almost 52 percent of the money received by the House Democratic majority during the 1988 campaign came from PACs. The House legislation also gave favoured treatment to those PACs that limited donations from their members to no more than $240 per year. Critics charged that this was simply a move to benefit labour PACs, which rely largely on small contributions.
Negotiations between the House and Senate on the issue were never convened, leaving the future of the matter to the 1991-92 session of Congress. But given the differences between the two houses - along with threats that President Bush would veto any bill calling for spending limits and public finance - few are certain of action in the near future. Nevertheless, both houses of Congress demonstrated in 1990 their ability to pass bills.
THE STATE OF THE STATES
The reforms at the federal level during the 1970s spurred numerous changes at the state and local levels. But recently, the states have often taken the lead while the issue remains stalemated in Congress. The push for reform at the state level comes at a time when many of the problems plaguing the congressional finance system, including heavy reliance on PACs and a shortage of financially competitive challengers, are increasingly present in the campaigns for statewide office and for seats in state legislatures.
As of the end of 1990, all 50 states had some form of campaign disclosure. A majority of states had restrictions on individual donations to a candidate, while half had limitations on PAC contributions.17 In addition, almost half the states featured direct or indirect public financing for candidates and/or political parties through tax checkoffs or voluntary tax add-ons. Many of the programs provided only modest amounts of public financing.
Several major municipalities, including New York and Los Angeles, the nation’s largest cities, provide for public financing (Alexander and Walker 1990).18
Following is a look at three political units - New Jersey, Minnesota and New York City - that have put extensive systems into place.
New Jersey
New Jersey adopted public financing of gubernatorial elections in early 1974, six months before Congress expanded the current system of presidential public funding. New Jersey’s move also was a reaction to scandal. At the time, New Jersey suffered from a reputation as one of the country’s more corrupt states, and public funding was adopted following a period in which several high-ranking public officials were convicted of campaign-related abuses.
New Jersey’s program, first implemented in the 1977 general election, later was extended to cover primaries as well; the gubernatorial races of 1981, 1985 and 1989 featured public funding during both the pre-nomination and general election periods. The New Jersey system is the most generous state program in the country. After raising a “threshold” of $150 000 in private donations, a candidate is eligible to receive $2 in public funding for every $1 raised, up to a prescribed ceiling. In return, he or she must abide by limits on individual contributions as well as overall expenditures and agree to participate in two debates each in the primary and general election.
Beginning in 1989, the expenditure limits and public subsidies were indexed to inflation, mirroring the presidential public funding system. The New Jersey legislature also tied the contribution limits to the consumer price index.
Advocates say that the generosity of the New Jersey system is directly related to its success; gubernatorial candidates of both parties have found it worth their while to accept limitations on spending in return for the substantial public subsidies offered. Of 40 major candidates who have run for the governorship since public funding was enacted, 38 have sought and received the subsidies (Alexander 1989, 9). And, unlike other states, the New Jersey legislature has been willing to appropriate money to supplement receipts from an income tax checkoff.
In the 1989 gubernatorial primary election, public funding accounted for 58 percent of the money spent within the expenditure ceiling (Alexander 1989, table 2, 14). During the general election, the Democratic and Republican candidates each received a public subsidy equal to two-thirds of their spending limits.
Nonetheless, the New Jersey system has not been without its problems; to some extent, it is a case study in the difficulty of seeking to impose expenditure ceilings. In 1977, the spending limit was set at a relatively low level. This ended up placing state Senator Raymond Bateman, the Republican challenger, at a significant disadvantage in his campaign against his better-known opponent. Democratic incumbent Brendan Byrne. “As the public support for the candidates shifted toward Governor Byrne, Senator Bateman, solely because of the expenditure limit, was unable to react and mount an alternative campaign to counteract the growth of support for Governor Byrne,” the New Jersey Election Law Enforcement Commission (ELEC) later reported (1982, 17-18).
Based on that experience, ELEC has quadrennially advocated repealing the expenditure ceilings and instead, providing candidates with a base of public funding sufficient to mount a viable campaign. In 1980, the New Jersey legislature voted to do away with the spending ceiling. Byrne, who had benefited from it, vetoed the measure. In 1989, the legislature raised the ceilings substantially.
As with the presidential candidates, New Jersey gubernatorial nominees have increasingly sought to legally evade spending limits through the use of soft money. In 1989, the state political parties financed a variety of “generic” campaign ads and activities that redounded to the benefit of the gubernatorial candidates (Fitzpatrick 1990, 14-18). In addition, independent expenditure campaigns, used to skirt presidential limits, played a role in the last two governorship races.
In New Jersey, the governor is the only official of the executive branch of government to be popularly elected. To date, the legislature has not chosen to extend public funding to their own election contests. In fact, unlike the gubernatorial race, there are now no limits on how much individuals, businesses, unions and PACs may contribute to legislative candidates. Consequently, much of the special interest money kept out of the governorship election has been diverted into the races for the legislature.
Minnesota
Like the New Jersey system, Minnesota’s public funding program also dates back to 1974. However, it owes its creation not to scandal, but to a political tradition of idealistic populism that has made this state one of the most liberal in the United States.
The Minnesota system, although not as well funded as New Jersey’s, is more extensive in several respects. It assists political parties as well as candidates. While limited to the general election, it covers all statewide candidates (excluding judicial office). Minnesota also is one of only three states that provide public funding to state legislative candidates. And the state broke new political ground in 1990 when it extended state public funding to elections for Congress. This seems certain to face a constitutional challenge on the grounds that state laws are preempted by federal laws in the case of federal elections.
To qualify for public funding in the general election, statewide and state legislative candidates must agree in writing to comply with expenditure ceilings as well as limits on aggregate contributions from individuals, unions, PACs and political parties (corporations are barred from making political donations). Although the Republican candidates for governor declined public funding in 1978 and 1982, the great majority of eligible candidates have opted to accept the money and abide by the limits since the system was first implemented in 1976. In 1986, when both major party gubernatorial candidates accepted public funding, about a quarter of their campaign budgets were underwritten by subsidies (Alexander 1989, 32-33).
Along with Rhode Island, Minnesota currently has the nation’s highest tax checkoff for public funding: $5. Initially, candidates of the state’s Democratic-Farmer-Labor Party were outdistancing their Republican counterparts in receipt of public funds. But in recent years, Republicans have gained a larger share of the available subsidies (Alexander 1989, 32).
There is mixed evidence as to whether Minnesota’s extensive program has achieved a basic goal of public funding systems: to increase the degree of competition among candidates by “levelling the playing field.” On the plus side, no one has run unchallenged for statewide office since the law was enacted. All but one of the winning candidates accepted public funding and therefore were constrained by spending limits (McCoy 1987).
However, the benefits of Minnesota’s public funding for legislative candidates can be questioned. There is some evidence that candidates in non-competitive races often opt for public financing to pay for their campaigns when the expenditure limits are high enough and the money the program provides is sufficient. But in competitive districts or those in which a strong challenger seeks to unseat an incumbent, candidates may not accept public financing so they can spend as much money as they deem necessary. Generally, Republicans do not participate in public funding as readily as do Democrats.
Expenditure limits also have posed problems for the Minnesota program. In 1980, a year in which both houses of the Minnesota legislature were up for election, the rate of participation in the public funding program dropped to 66 percent from 92 percent four years earlier (Alexander 1989,table 5, 29). At the time, inflation was running in double digits, and the expenditure ceiling had not been raised to take that into account - thereby making the restrictions unattractive to many candidates. After the 1980 election, both spending limits and public funding allocations were tied to the consumer price index, and in the 1990 election the rate of candidate participation was back up to 92 percent.
New York City
Of the four municipalities with public financing, the most extensive program is in New York City. As was the case with the neighbouring state of New Jersey, the New York City program was born of scandal. In response, the City Council in February 1988 enacted public financing legislation, which was signed by Mayor Edward Koch and ratified overwhelmingly by city voters the following November. In 1989, Koch sought re-election under the first test of the new program, losing to David N. Dinkins, then Manhattan Borough president.
Those seeking public funding in New York City must agree to abide by expenditure limits and to demonstrate the viability of their candidacy by raising a relatively modest threshold amount in private donations. Public funds then match private contributions of up to $500 from New York City residents. The program covers all of the city’s elected offices: mayor, City Council president, comptroller, the presidents of New York’s five boroughs and the members of the City Council.
Candidates participating in the New York City program also must agree to limit individual contributions to $3 000. This is far more restrictive than current New York state law, which sets the individual limit at $50 000.
An assessment of the city’s first experience with the new law in 1989 found that it had sharply diminished the role of large contributors - a perennial concern in a city where the powerful real estate industry has often exercised its financial clout in election years.
In terms of candidate participation, the program had its biggest impact in the mayor’s race. Five of the six major candidates opted to participate in the program. The Democratic Party nominee, Dinkins, received about 12 percent of his total receipts from public funding; Republican nominee Rudolph Giuliani received about a fifth of his campaign budget from public funds (New York City Campaign Finance Board 1990, 5). In all, 48 candidates who appeared on the ballot in either the primary or general election participated in the program, and 36 received public funds (ibid., 29).
The program was less successful in bringing electoral competition to City Council races, which - with a few exceptions - traditionally have been low-visibility, one-sided contests. While 33 candidates for the 35 council seats opted into the program, only 25 actually received any public funding (New York City Campaign Finance Board 1990, 16). This may change in the 1991 special elections: the City Council is being expanded from 35 to 51 seats and given enhanced power.
CONCLUDING OBSERVATIONS
As noted at the outset, it is risky to draw comparisons between the United States and Canada in view of the significant differences in their political systems. However, in terms of campaign finance, there are several basic realities that underlie both systems as we enter the 1990s:
Professionalized campaigns are here to stay. The host of professional campaign services relied upon by competitive candidates and parties is costly. No amount of legislative action is going to turn back the clock and de-professionalize campaigns. The issue, rather, is how to finance modern elections in a manner that minimizes the opportunity for corruption, as well as the appearance of corruption.
Money is speech. That tenet lies at the heart of the Buckley decision’s finding that mandatory expenditure limits were prohibited under the provisions of the U.S. Constitution. But it is a principle applicable to any modern democratic society in which free speech is a basic right. To restrict a candidate’s ability to avail himself or herself of the means of promotion can be considered a restriction on speech. Any effort to forestall real or perceived corruption by curtailing the supply of political money must be balanced carefully against basic individual rights.
Unforeseen consequences are inevitable. In democratic pluralistic societies, such as those of the United States and Canada, efforts to regulate the flow of money will never work quite as intended. Some affected parties will seek redress in the judicial process; in the United States, the current structure of campaign finance was shaped almost as much by litigation as by the laws enacted by Congress. The best of intentions often have unintended side effects. In enacting the 1979 FECA amendments, Congress had the purpose in mind of strengthening grassroots political parties. What resulted was the rip tide of soft money that now courses through presidential elections.
The foregoing are among the realities and principles to be kept in mind in evaluating the experience of campaign finance reform and proposing further changes. In the United States, several obvious lessons arise from the experience of the past 20 years:
Expenditure limits develop leaks. Limitations of any kind - whether contribution or expenditure limits – develop leaks. But expenditure limits are the most problematic, as was demonstrated by the Bush-Dukakis race of 1988 and the New Jersey experience (and also, to some extent, by the experience with political interest groups in Canadian elections). In the U.S. political system, candidates at both the federal and state levels have found a multitude of ways to get around the limits by such hard-to-trace forms of political spending as soft money and independent expenditures. The former has reinjected the large contributor into presidential campaigns. The latter has intensified the use of negative advertising, resulting in heightened cynicism in an already disillusioned voting public.
At the congressional level, there is evidence that expenditure limits could place relatively unknown challengers at an even greater disadvantage at a time when races for the House and Senate are growing less and less competitive. The experience at the state legislative level indicates that when a candidate must abide by spending limits to receive public funding, some candidates have chosen to decline public financing. The result is that the candidate must seek that much more private money, which is derived increasingly from groups with interests before the legislature.
Public funding has benefits. To say that questions can be raised about expenditure limits is not to render the same judgement on public funding. Even with undesirable forms of campaign money coming in through leaky expenditure limits, public funding clearly has displaced a significant amount of private donations in U.S. presidential campaigns. For example, even given the degree to which Dukakis and Bush were able to circumvent the official spending limits in 1988, public subsidies still accounted for significant amounts of their respective campaign budgets. Were that money not available, presidential candidates would likely be forced to do what congressional aspirants already are doing: pursue more PAC money.
From a practical standpoint, the presidential candidates operate under a scheme that has been dubbed floors-without-ceilings. Unrestrained by effective spending ceilings, they nevertheless are given a base of public funding from which to get their messages across through television and other means. In fact, Dukakis’ home state of Massachusetts has a floors-without-ceilings system in which candidates receive public funding without committing to spending limits. This idea has met with resistance in Congress and many state legislatures, where some are reluctant to provide taxpayer dollars without attempting to restrain private fund spending. On the other hand, the floors-without-ceilings approach allows the candidates to spend more than the public financing provides without artificial limitations.
Incumbents vs. challengers. Analysing campaign spending data, political scientist Gary C. Jacobson showed that campaign spending does not have the same consequences for incumbents and challengers alike. Jacobson found that spending by challengers has more impact on election outcomes than does spending by incumbents (Jacobson 1978, 469).
Simply being known and remembered by voters is a very important factor in electoral success. The average incumbent, provided with the resources of office, already enjoys an advantage in voter recognition prior to the campaign. The dissemination of additional information about the incumbent during the campaign, therefore, may often be superfluous even though it helps reinforce voters’ opinions. On the other hand, the challenger, not so well known to most voters, has everything to gain from an extensive and expensive effort to acquire voter awareness.
Translated into financial terms, this means that because senators and representatives are generally better known, they usually need less campaign money but are able to raise more. The challengers, while they may need more money, have difficulty in getting it. But when they do, either through providing it to their own campaigns out of their own wealth, or by attracting it, they become better known and are more likely to win. If the incumbent then raises money to meet the threat, spending money helps him or her less per dollar spent than additional dollars spent by the challenger. In summary, those votes that change as a result of campaign spending generally benefit challengers.
Jacobson concluded that any campaign finance policy, such as public subsidies, that would increase spending for both incumbent and challenger would work to the benefit of the latter, thus making elections more competitive. On the other hand, any policy that attempts to equalize the financial positions of candidates by limiting campaign contributions and spending would benefit incumbents, thus lessening electoral competition (Jacobson 1978, 474).
Contribution limits: How high or how low? In setting contribution limits, a balance must be struck between the need to reduce public perceptions of excessive spending and the need for candidates to raise adequate funds to communicate with voters.
No one has seriously advocated a return to the era of the six-figure donor: the presence of $100 000 soft-money contributors in the 1988 campaigns prompted editorial criticism and a negative public reaction. At the same time, setting contribution limits too low can have the effect of turning public officials into non-stop political fund-raisers seeking to collect sufficient money in small lots.
An appropriate limit depends greatly on the political demography of the jurisdiction for which it is intended. But the purpose should be guided by recognition that money is an essential ingredient in political campaigning. Once the decision is made, contribution limits should be indexed to inflation to prevent the type of problem that has arisen in contests for Congress: the erosion of the value of the $1 000 individual contribution limit has, among other effects, provided greater incentives for candidates to seek PAC support with the higher limit of $5 000.
