Campaign finance in the United States is the financing of electoral campaigns at the federal, state, and local levels.
At the federal level, the primary source of campaign funds is individuals; political action committees are a distant second. Contributions from both are limited, and direct contributions from corporations and labor unions are prohibited. On January 21, 2010, the Supreme Court overturned a 20-year-old ruling that had previously prohibited corporations and unions from using money from their general treasuries to produce and run their own campaign ads.
The Federal Election Commission (FEC) is an independent federal agency created in 1975 by amendments to the Federal Election Campaign Act (FECA) to enforce FECA.
Public financing is available for qualifying candidates for President during both the primaries and the general election. Eligibility requirements must be fulfilled to qualify for a government subsidy and those that do accept government funding are usually subject to spending limits. The system is designed so that the Democratic or Republican candidates for President of the United States routinely qualify for funds, while excluding most other party candidates.
Races for non-federal offices are governed by state and local law. Over half the states allow some level of corporate and union contributions. Some states have limits on contributions from individuals that are lower than the national limits, while five states have no limits at all.
Campaign finance is a controversial issue, pitting concerns about free speech against concerns about corruption and inequality on the part of those who favor existing or further restrictions.
Background to federal campaign finance reform
For most of the history of the United States, federal election campaigns were relatively unregulated. Laws such as the Pendleton Act and the Hatch Act attempted to limit participation by government employees in funding campaigns. The Tillman Act and Federal Corrupt Practices Act sought to limit more broadly the influence of money on the campaigns, but these were largely ignored.
After the Watergate affair, Congress took action to further regulate federal campaigns. Amendments to the Federal Election Campaign Act(FECA) in 1974 created an independent agency, the Federal Elections Commission (FEC), to monitor donations and spending on federal campaigns. FECA also placed limits on campaign contributions and expenditures, the latter of which were invalidated on First Amendment grounds in the Supreme Court decision of Buckley v Valeo. In 2002, Congress further attempted to reform federal campaign finance reform with the Bipartisan Campaign Reform Act. This law was also challenged in the Supreme Court, but its core provisions, including restrictions on "soft money" donations to political parties and restrictions on "electioneering communications" (broadcast ads mentioning a candidate within 30 days of a primary or 60 days of a general election) were upheld by the Supreme Court in McConnell v. Federal Election Commission.
Hard money and soft money
Political money in the United States is often divided into two categories, "hard" money and "soft" money.
"Hard" money is contributed directly to a candidate of a political party. It is regulated by law in both source and amount, and monitored by the Federal Election Commission.
"Soft" money is contributed to the political party as a whole. Historically, "soft money" referred to contributions made to political parties for purposes of party building and other activities not directly related to the election of specific candidates. Because these contributions were not used for specific candidate advocacy, they were not regulated by the Federal Election Campaign Act, as interpreted by the Supreme Court in Buckley v. Valeo. The Bipartisan Campaign Reform Act of 2002 (also known as McCain-Feingold) prohibited unregulated contributions to national party committees. "Soft money" also refers to unlimited contributions to organizations and committees other than candidate campaigns and political parties (except, where legal, to state and local parties for use solely in state and local races). Organizations which receive "Soft money" contributions are often called "527s", for the section of the tax code under which they operate. Such organizations can legally engage in political activity, but funds from "soft money" contributions may not be spent on ads promoting the election or defeat of a specific candidate.
The U.S. Supreme Court decision Buckley v. Valeo (1976) held that limitations on donations to candidates were constitutional (because of the compelling state interest in preventing corruption or the appearance of corruption), but limitations on the amount campaigns could spend (spending limits or caps) were an unconstitutional abridgment of free speech under the First Amendment. Buckley v. Valeo also held that only speech that expressly advocated the election or defeat of a candidate could be regulated. Thus organizations could spend unregulated "soft money" for a variety of activities, including "issue advertising," a broad term that included any advertising that stopped short of expressly advocating the election or defeat of a candidate through words and phrases such as "vote for," "vote against," "support," "defeat," or "elect".
Beginning in the late 1970s, parties successfully petitioned the Federal Election Commission to be allowed to spend soft money on non-federal party building and administrative costs. Soon, this use of soft money expanded to voter registration, get out the vote, and issue advertising. For example, a wealthy individual could give a large contribution in soft money to a political party. The party could then spend this money on political ads. These ads could not explicitly or expressly advocate the election or defeat of a candidate (such as "Vote for Smith," "Elect Smith," "Send Smith to Congress," "Vote Against Jones," or "Defeat Jones"), but they could use the names of candidates ("John Smith is an honest man who stands up for the people; Bill Jones is a chronic liar who's taken money from special interests and advocated cutting Social Security. Call Bill Jones and tell him how you feel about this.")
The Reform Party, founded by Ross Perot, made campaign finance reform a central issue in its platform, and when Perot ran for president in 1992 and 1996 he strongly argued for it. Oddly enough, most political scientists believe that campaign finance laws hindered Perot's efforts to establish the Reform Party on a permanent basis. It again became a major issue in the 2000 U.S. presidential election, especially with candidates John McCain and Ralph Nader. Organizations in favor of campaign finance reform included many public interest groups, such as Common Cause, Democracy 21, the Campaign Legal Center, and Democracy Matters. Opposition came from a coalition of organizations such as the American Civil Liberties Union and the Center for Competitive Politics (both of which argue that campaign finance reform would harm free speech) and the National Rifle Association, National Right to Life Committee, and other organizations.
The Bipartisan Campaign Reform Act of 2002, sometimes called McCain-Feingold, amended the Federal Election Campaign Act (1971) to ban national political party committees (most prominently the Democratic National Committee and Republican National Committee) from accepting or spending soft money contributions. It also included a "stand by your ad" provision requiring candidates to appear in campaign advertisements and claim responsibility for the ad (most commonly with a phrase similar to "I'm John Smith and I approve this message.")
The legislation was challenged in McConnell v. Federal Election Commission (2003), but most of the act was upheld by the Supreme Court. However, a further challenge in Federal Election Commission v. Wisconsin Right to Life, Inc. (2007), with new justices on the Supreme Court, resulted in parts of McConnell being effectively, though not formally, reversed.
After the passage of the Bipartisan Campaign Reform Act, many of the soft money-funded activities previously undertaken by political parties were taken over by various 527 groups, which funded many issue ads in the 2004 presidential election. In 2006 the Campaign Finance Institute issued a study on 527 groups. The study shows that many advocacy groups deploy three different types of organization—political action committees (PACs), 527 groups, and 501(c) advocacy entities—in their efforts to influence federal elections and public policy. These cumulative, coordinated efforts increase the groups' financial influence in elections. The CFI analysis presents much new information about the major role played by 501(c)(4) social welfare, (c)(5) labor union and (c)(6) trade association organizations in elections, and the different ways in which they and related 527 organizations are used by Republican and Democratic-oriented groups. ().
Bundling
Another consequence of the limitation upon personal contributions from any one individual ($2400 for each election, with a total of $4800 for a primary and general election as of 2009) is that campaigns seek out "bundlers," people who can gather contributions from many individuals in an organization or community, and present the sum to the campaign. Campaigns often recognize these bundlers with honorary titles and, in some cases, exclusive events featuring the candidate.
Bundling has always existed in various forms, but has become more important with the enactment of limits on contributions at the
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