finance

finance

Elections for the President and Congress dominate the electoral structure of American politics. There are a great many elections in America each year as there are a large number of offices to fill at many levels of government. The total cost of these elections is vast. In 1976, the total cost of electioneering was $540 million. The cost of the presidential campaign in 1996 was $232 million. The 2000 national election campaign in total may well have cost over $1 billion.

Over the years the cost of electioneering has greatly increased primarily because of the expanded use of the media - especially television. The 1996 presidential election campaign spent nearly $116 million on media related events. Added to this was the cost of coast-to-coast campaigning which requires the candidates to bring with them a large retinue of advisors, speech writers, press officers etc. Considerable financial resources were required for this presidential election. This was overshadowed by the 2000 election campaign primarily as the 1996 result was seen by many as a foregone conclusion whereas the 2000 campaign was seen as being a very evenly matched contest. Both candidates greatly used television to 'sell' their beliefs.

There are laws that each party much adhere to regarding the acquisition of money. However, it is recognised that they are easy to by-pass and President Johnson acknowledged this in 1967 when he said that the laws "were more loophole than law." The use of ‘soft money’ is very important.

The background to these laws is simple. The investigation into the Watergate affair (when Nixon was president) found that Nixon had frequently gained funds from sources which required favours in return. The Milk Producers Association gave Nixon’s campaign fund $2 million in return for the president’s support for an increase in milk price. Nixon also received $1.7 million from people who were subsequently made ambassadors. In all $60 million was dubiously acquired and a large chunk of this was spent on activities against the Democratic Party.

The reaction to this was the passing of the Federal Election Campaign Act in 1971 which has subsequently been amended in 1974, 1976 and 1979. The problem legislators faced was the issue "as old as America itself" (Bowles) - organisations or individuals donating large sums to a candidate who might be elected and then that donor would expect something in return. 

FECA sort to change this. It laid down strict rules about campaign contributions and campaign expenditure. It states that an individual can only contribute $1000 to any one candidate. An organisation can only contribute $5000. FECA also wanted to impose a limit to the amount a candidate could spend on a campaign but this was declared unconstitutional by the Supreme Court. While no limit is officially set and while FECA is relatively simple to by-pass, candidates have what is essentially the freedom to spend as they wish.

FECA introduced the public funding of presidential electoral campaigns. When the presidential candidates have been chosen they can decide to finance their campaign from the Presidential Election Campaign Fund. If they decide to do this, they may not use privately donated funds. In 1976 both Carter and Ford received $20 million from the fund. The government also provides $2 million for the national conventions of both major parties. Quite clearly in recent years such amounts have been far too small. Though FECA has not been broken, both parties have swollen their campaign funds by using ‘soft money’.

The amount a party can contribute to a candidate is limited by law - be it for House, Senate or presidential campaigns. Each House candidate can receive $5000 per cycle while a Senate candidate receives $17,500. This is called direct support. But state and national party committees can spend ‘hard money’ on behalf of a candidate. A state party committee can spend the same as a national committee or it can transfer its contribution to a national committee. Candidates do not receive this money direct. The party committees and the candidates may decide how to spend the money but the responsibility of how the money is spent lies with the committees. Both parties must disclose to the Federal Election Committee (FEC) how contributions are made and how they are spent.

The 1979 Amendment to FECA allowed parties at state and local level to spend unlimited amounts on "grass-root" political support for both presidential and congressional candidates. Parties can also spend unlimited amounts on voter registration and voter drives. However, they must not advocate voters voting for a particular candidate in a federal election. The parties are not allowed to produce adverts with "vote for…" of "support ……" but they can produce adverts that support or oppose the stated opinions of a candidate which effectively gets around this problem. This is called issue advocacy. It received Supreme Court blessing in 1996 in the Colorado Republican Party v FEC (424 US 261) case when it was decided that the government could not impose limits on what parties spent of their own funds when such spending is not discussed with a candidate or his/her agents.

The use of ‘soft money’ has greatly inflated what candidates have to spend. This is money transferred to state parties as they are subject to looser FEC controls than national committees. In 1996, the Democratic National Party transferred 56% of its money to state and local party committees. The Republican National Party transferred 43%. Such actions are legal and they allow candidates to have access to vast sums of money. Direct contributions to candidates in federal elections by trade unions, businesses etc. are illegal. Direct donations to political parties are unrestricted. Both parties raised a total of $263 million for the 1996 presidential election which was three times larger than the total raised for the 1992 election. The figure for the 2000 election is well in excess of the 1996 figure.

One complicating factor is the spending by individuals - known as "independents" - who can constitutionally express their views as laid down in the First Amendment. These "independents" can have a significant electoral impact especially at a local level. If someone not affiliated to either party wishes to produce posters stating their political choice - and legally finances the production of these posters - then stopping them would violate their constitutional rights.

With regards to presidential and congressional elections, foreign donations are illegal. Donations given in return for favours are illegal. In the 1996 presidential campaign, both Clinton and Gore seemingly overstepped the mark with certain incidents. In January 1996, Clinton was informed that the party would need to raise $180 million to allow it to successfully campaign. Potential and actual donors were allowed to stay in the Lincoln Bedroom at the White House. Gore acknowledged using his office telephone to raise campaign funds/donations - which was illegal under Section 607 of the Federal Criminal Code, and the party received funds from a source who was heavily linked to China, a nation severely condemned by the United Nations for its violation of human rights. In September 1996, Clinton alone undertook seventeen fund raising engagements. His party campaign machine had estimated that each coffee morning would raise $400,000.

In 1997, Congress announced an investigation into the role of the White House with regards to the raising of campaign funds. The issue is clearly of great importance within the concept of democracy as the FEC has provided enough evidence that those candidates who are poorly funded will almost certainly suffer defeat in an election and the FEC has shown that in recent House elections the winner of individual contests outspent the loser by 10 times. 

If money is the key to electoral success is it democratic that some are bound to lose not because of their stated policies but because they cannot fund prime-time television coverage and advertising costs? Is it democratic that those with an apparent source of money have what would appear to be an automatic advantage over their rivals? One of the key areas for raising money are Political Action Committees.






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