Campaign Campaign Finance 101Finance 101

What is the difference between hard What is the difference between hard money and soft money?money and soft money?

What is FECA?What is FECA?What is the BCRA?What is the BCRA?

Why is campaign finance so Why is campaign finance so controversial?controversial?

Campaign finance Campaign finance “slang”“slang”

FECFEC – Federal Election Commission – Federal Election Commission BCRABCRA – Bipartisan Campaign Reform Act – Bipartisan Campaign Reform Act

(2002)(2002) Hard money = Federal (regulated) moneyHard money = Federal (regulated) money

Political donations contributed directly to a Political donations contributed directly to a candidate of a political party, SUBJECT TO LIMITS candidate of a political party, SUBJECT TO LIMITS (legal under BCRA)(legal under BCRA)

EXAMPLE: money for an ad that educates voters EXAMPLE: money for an ad that educates voters about issues, with a specific candidate endorsement about issues, with a specific candidate endorsement ((EXPRESSED ADVOCACY)EXPRESSED ADVOCACY)

Soft money = Nonfederal moneySoft money = Nonfederal money Political donations and campaign contributions to Political donations and campaign contributions to

parties or “party building” activities; SUBJECT TO parties or “party building” activities; SUBJECT TO STATE LAWSTATE LAW

EXAMPLE: money for ads that educate voters about EXAMPLE: money for ads that educate voters about issues, as long as the ads don't take the crucial step issues, as long as the ads don't take the crucial step of telling voters which candidates to vote for of telling voters which candidates to vote for ((PUBLIC COMMUNICATION LANGUAGEPUBLIC COMMUNICATION LANGUAGE))

Federal Election Federal Election ActivitiesActivities

GOTVGOTV Voter IDVoter ID Generic Campaign Generic Campaign

ActivityActivity Voter RegistrationVoter Registration Public Public

CommunicationCommunication

Which of the following is an Which of the following is an example of Public example of Public

Communication? Express Communication? Express Advocacy?Advocacy?

Candidate X runs an ad Candidate X runs an ad that says, "I am a good that says, "I am a good person. Candidate Y is a person. Candidate Y is a bad person. Vote for me bad person. Vote for me on election day." on election day."

Because of the "Vote for Because of the "Vote for me..." portion, this is a me..." portion, this is a political ad, which must be political ad, which must be paid for with "hard paid for with "hard money." money."

Candidate Y runs an ad that Candidate Y runs an ad that says, "Candidate X has a says, "Candidate X has a record that includes awful record that includes awful things. If these awful things things. If these awful things continue, people will come continue, people will come to your house, steal your to your house, steal your money and shoot your dog. money and shoot your dog. Be sure to vote on election Be sure to vote on election day.“day.“

Because the ad "educates" Because the ad "educates" people on an issue and people on an issue and doesn't tell them to vote for doesn't tell them to vote for a particular candidate, it's a particular candidate, it's party building, and can be party building, and can be paid for by soft money.paid for by soft money.

Overview History of Overview History of Campaign Finance Campaign Finance

RegulationRegulation Beginning of time—Civil War: No Beginning of time—Civil War: No

regulationregulation Civil War—1910Civil War—1910

Gilded AgeGilded Age Exceptionally scandalous politicians (Exceptionally scandalous politicians (Boss TweedBoss Tweed))

1867: Naval Appropriations Bill 1867: Naval Appropriations Bill First federal effort to regulate campaign financeFirst federal effort to regulate campaign finance Prohibits officers and employees of the fed. gov’t Prohibits officers and employees of the fed. gov’t

from soliciting contributions from soliciting contributions 1883: Civil Service Reform Act (Pendleton 1883: Civil Service Reform Act (Pendleton

Act) prohibits the same solicitation of all Act) prohibits the same solicitation of all federal workersfederal workers

Overview History of Overview History of Campaign Finance Campaign Finance

RegulationRegulation Corrupt Practices Acts of 1911 and 1925Corrupt Practices Acts of 1911 and 1925

Set disclosure requirements for House and Set disclosure requirements for House and Senate ElectionsSenate Elections

Spending limits ($25k for Senate; $5k for Spending limits ($25k for Senate; $5k for House)House)

Ridiculously weak and regularly violatedRidiculously weak and regularly violated 1971: Federal Election Campaign Act 1971: Federal Election Campaign Act

(FECA)(FECA) 1976: 1976: Buckley v. ValeoBuckley v. Valeo (1976) (1976)

www.mit.edu/~17.251/finance.pptwww.mit.edu/~17.251/finance.ppt

Federal Election Federal Election CommissionCommission

PurposePurpose In 1975, Congress created the In 1975, Congress created the Federal Election Federal Election

CommissionCommission (FEC) to administer and enforce the (FEC) to administer and enforce the FECA FECA

Federal Election Campaign Act (FECA)—Federal Election Campaign Act (FECA)—the the statute that governs the financing of federal statute that governs the financing of federal elections.elections.

The duties of the FEC, which is an independent The duties of the FEC, which is an independent regulatory agency, are toregulatory agency, are to

disclose campaign finance information disclose campaign finance information enforce the provisions of the law such as the limits and enforce the provisions of the law such as the limits and

prohibitions on contributions, prohibitions on contributions, oversee the public funding of Presidential elections. oversee the public funding of Presidential elections.

FEC Rules & RegulationsFEC Rules & RegulationsThe PlayersThe Players

Government Government FEC – Federal Election CommissionFEC – Federal Election Commission

Campaign CommitteesCampaign Committees CandidatesCandidates

National Party CommitteesNational Party Committees State & Local Party CommitteesState & Local Party Committees Separate Segregated FundsSeparate Segregated Funds

PACs connected to corporations, unions, etc.PACs connected to corporations, unions, etc. Nonconnected CommitteesNonconnected Committees

All other PACsAll other PACs 527s527s IndividualsIndividuals

Buckley v. Valeo (1976)Buckley v. Valeo (1976)

upheld FECA, which set limits on campaign upheld FECA, which set limits on campaign contributions, but ruled that spending contributions, but ruled that spending money to influence elections is a form of money to influence elections is a form of constitutionally protected free speech, and constitutionally protected free speech, and struck down portions of the law. The court struck down portions of the law. The court also ruled candidates can give unlimited also ruled candidates can give unlimited amounts of money to their own campaigns. amounts of money to their own campaigns.

the case remains the starting point for the case remains the starting point for judicial analysis of the constitutionality of judicial analysis of the constitutionality of campaign finance restrictions (campaign finance restrictions (precedent)precedent)

Buckley v. Valeo (1976)--Buckley v. Valeo (1976)-- Strikes down:Strikes down:

Overall spending Overall spending limits of Congress limits of Congress & President & President (partially)(partially)

Limits on Limits on candidates’ use of candidates’ use of own fundsown funds

Limits on media Limits on media expendituresexpenditures

Independent Independent expenditure limitsexpenditure limits

Allows:Allows: Individual contributions Individual contributions

($1k/candidate/election)($1k/candidate/election) PAC limits PAC limits

($5k/candidate/election)($5k/candidate/election) Party committee limits Party committee limits

($5k/candidate/election)($5k/candidate/election) Cap on total Cap on total

contributions individual contributions individual can make to all can make to all candidates ($25k)candidates ($25k)

Cap on spending “on Cap on spending “on behalf of behalf of candidates” by candidates” by partiesparties

The BCRA The BCRA (McCain-Feingold Act, (McCain-Feingold Act,

2002)2002)Designed to address:Designed to address: The increased role of soft The increased role of soft

money in campaign money in campaign financing, financing, by prohibiting by prohibiting national political party national political party committees from raising committees from raising or spending any funds not or spending any funds not subject to federal limitssubject to federal limits, , even for state and local even for state and local races or issue discussionraces or issue discussion

Define the proliferation of Define the proliferation of issue advocacy ads, by issue advocacy ads, by defining as defining as "electioneering "electioneering communications"communications" broadcast ads that name a broadcast ads that name a federal candidate within 30 federal candidate within 30 days of a primary or caucus days of a primary or caucus or 60 days of a general or 60 days of a general electionelection

Prohibiting any such ad Prohibiting any such ad paid for by a corporationpaid for by a corporation (including non-profit issue (including non-profit issue organizations such as Right organizations such as Right to Life or the Environmental to Life or the Environmental Defense Fund) or paid for Defense Fund) or paid for by an unincorporated entity by an unincorporated entity using any corporate or using any corporate or union general treasury union general treasury funds.funds. all campaign all campaign

advertisements included a advertisements included a verbal statement to the verbal statement to the effect of effect of "I'm [insert "I'm [insert candidate's name] and I candidate's name] and I approve this message." approve this message."

What does Federal Election What does Federal Election Law Regulate?Law Regulate?

In GeneralIn General The financing of federal The financing of federal

electionselections SpecificallySpecifically

Disclosure of financial Disclosure of financial activityactivity

ContributionsContributions Receiving and GivingReceiving and Giving

ExpendituresExpenditures Candidate support Candidate support

activitiesactivities Federal election Federal election

activitiesactivities

Disclosure: “The costs of Disclosure: “The costs of democracy”democracy”

The FEC oversees the The FEC oversees the campaign disclosure campaign disclosure filings of candidate, filings of candidate, political party, political political party, political action, and individual action, and individual contributions.contributions.

Campaign disclosure Campaign disclosure documents filed should documents filed should reflect both the source of reflect both the source of funding and purpose of funding and purpose of expenditures made.expenditures made.

However, there is However, there is reporting complexity, reporting complexity, dishonesty, and even dishonesty, and even loopholes.loopholes.

Each campaign (for Each campaign (for federal office) has to run a federal office) has to run a PAC that reports revenue PAC that reports revenue and expenses to the FEC.and expenses to the FEC. cost of travel, cost of travel, advice on topics like advice on topics like

message and voter message and voter turnout turnout

direct costs of direct costs of communicating with communicating with votersvoters

The types and purposes of The types and purposes of campaign spending will campaign spending will change with the legal and change with the legal and social landscape.social landscape.

Other Ways to Support Other Ways to Support CandidatesCandidates

Who can contribute?Who can contribute? In-kind contributions-In-kind contributions-

donations that are done in donations that are done in goods and services rather than goods and services rather than money money AnyoneAnyone

Independent expenditure--Independent expenditure--advocates the election or defeat advocates the election or defeat of another candidate NOT made of another candidate NOT made in cooperation, with a in cooperation, with a candidate, candidate’s candidate, candidate’s committee or partycommittee or party AnyoneAnyone

Coordinated Expenditures-Coordinated Expenditures-- - advocates the election or defeat advocates the election or defeat of another candidate MADE in of another candidate MADE in cooperation, with a candidate, cooperation, with a candidate, candidate’s committee or partycandidate’s committee or party

IssuesIssues SC overruled provision in BCRA SC overruled provision in BCRA

prohibiting IEs after CE in same prohibiting IEs after CE in same month (1month (1stst amend. violated) amend. violated)

Special methodsSpecial methods Joint fundraising Joint fundraising

committees (JFC)--committees (JFC)--two or two or more groups to join forces more groups to join forces and fund-raise together and fund-raise together (subject to FEC rules)(subject to FEC rules)

EarmarkingEarmarking--a legislative --a legislative (especially congressional) (especially congressional) provision that directs provision that directs approved funds to be spent approved funds to be spent on specific projects, or that on specific projects, or that directs specific exemptions directs specific exemptions from taxes or mandated fees from taxes or mandated fees

Issue Ads – a type of Issue Ads – a type of independent expenditureindependent expenditureSecond Amendment Ad (Anti Obama)Second Amendment Ad (Anti Obama)

http://http://www.youtube.com/watch?vwww.youtube.com/watch?v=NUuuh98PM4M=NUuuh98PM4M

Swift Boat Veterans (Anti Kerry)Swift Boat Veterans (Anti Kerry)

http://http://www.youtube.com/watch?vwww.youtube.com/watch?v=phqOuEhg9yE=phqOuEhg9yE

Non issue Ad:Non issue Ad:

www.livingroomcandidate.comwww.livingroomcandidate.com

Upcoming Federal Upcoming Federal Campaign Finance IssuesCampaign Finance Issues

527 groups—527 groups—tax-exempt organizations tax-exempt organizations that may raise unlimited funds for their that may raise unlimited funds for their voter mobilization and issue advocacy voter mobilization and issue advocacy only required to file regular disclosure reports only required to file regular disclosure reports

on activities expressly advocating the election on activities expressly advocating the election or defeat of a federal candidate or or defeat of a federal candidate or electioneering communications electioneering communications

Should they be regulated by the FEC?Should they be regulated by the FEC? InternetInternet

Currently not considered political advocacy Currently not considered political advocacy Not regulated by FECNot regulated by FEC

Where does my money Where does my money go?go?

It depends!It depends! CandidateCandidate

Candidate specific activitiesCandidate specific activities Contributions to other Contributions to other

candidates, parties or candidates, parties or causescauses

DNC/RNCDNC/RNC Federal candidatesFederal candidates Allocated nationally Allocated nationally

State Party CommitteesState Party Committees Federal, state & local Federal, state & local

candidatescandidates Allocated statewideAllocated statewide

PACsPACs Support candidates, parties Support candidates, parties

that agree on specific issuesthat agree on specific issues 527s527s

Separate campaignSeparate campaign