Campaign Finance Reform

1. Campaign Finance Reform Purpose Fundamental Question Possible Reform Strategies Available to Legislators Two Major Legislative Acts FECA and Buckley v. Valeo BCRA (McCain-Feingold) and McConnell v. FEC After BCRA… The Current Situation Essential Questions #4 and #6

2. Purpose • To identify and explain two major legislative acts designed to regulate the role of money in elections • To identify and explain the Supreme Court’s interpretation of the legislation • To identify and explain the impact of the legislation • To answer Essential Questions #4 and #6

3. Fundamental Question What role should money play in elections? The debate is dominated by a tension between two opposing views. “Americans have the right to freedom of speech. Money is a form of speech so there should be no restrictions. Since they earn their money, they have the right to spend it as they wish.” v. “Americans should be treated equally regardless of wealth. Money should be restricted so that candidates don’t give preference to the wealthy at the expense of the poor.”

4. Possible Reform Strategies Available to Legislators There are three general strategies that legislators could try to use. • Place limits on… • persons/groups giving money to candidates • persons/groups doing independent expenditures (running their own campaigns, separate from candidates’/parties’ campaigns) • candidates receiving money • candidates spending money • parties receiving money • parties spending money • Require disclosure on… • sources of candidates’ money • uses of candidates’ money • Give government subsidies to… • presidential candidates • other candidates • parties

5. FECA Before FECA • The campaign finance provisions of all of previous laws were largely ignored, however, because none provided an institutional framework to administer their provisions effectively. • The 1925 Corrupt Practices Act, passed after Teapot Dome scandal, was “written in such a way as to exempt virtually all (members of Congress) from the (disclosure) provisions.” • The laws had other flaws as well. For example, spending limits applied only to committees active in two or more States. • Candidates could avoid the spending limit and disclosure requirements altogether because a candidate who claimed to have no knowledge of spending on his behalf was not liable under the 1925 Act. • Watergate scandal builds momentum for new reforms. • 1972 Watergate Scandal exposed quid pro quo arrangements between President Nixon and individuals/corporations

6. FECA FECA becomes law 1971: Federal Election Campaign Act (FECA) 1974: FECA amended • DISCLOSURE • Created the Federal Election Commission, a government agency • All contributions and spending must be reported in federal elections • LIMITS • Limited contributions to candidates’ campaigns in federal elections • Limited spending by candidates’ campaigns in federal elections • SUBSIDIZE PRESIDENTIAL ELECTIONS • Tax form allowed $1 contribution (now $3)

7. Buckley v. Valeo Background 424 U.S. 1 (1976) Docket Number: 75-436 Argued: November 10, 1975 Decided: January 30, 1976 Question Presented Did the limits placed on electoral expenditures by the Federal Election Campaign Act of 1971 violate the First Amendment's freedom of speech and association clauses?

8. Buckley v. Valeo Conclusion In this complicated case, the Court arrived at two important conclusions. • It held that restrictions on individual contributions to political campaigns and candidates DID NOT violate the First Amendment since the limitations of the FECA enhance the "integrity of our system of representative democracy" by guarding against unscrupulous practices.

9. Buckley v. Valeo Conclusion In this complicated case, the Court arrived at two important conclusions. 2. The Court found that governmental restriction of spending (expenditures) in campaigns, the limitation on expenditures by candidates from their own personal or family resources, and the limitation on total campaign expenditures DID violate the First Amendment. Since these practices do not necessarily enhance the potential for corruption that individual contributions to candidates do, the Court found that restricting them did not serve a government interest great enough to warrant a curtailment on free speech and association.

10. FECA beforeBuckley v. Valeo FECA becomes law 1971: Federal Election Campaign Act (FECA) 1974: FECA amended 1976: FECA amended to comply with Buckley v. Valeo • DISCLOSURE • Created the Federal Election Commission, a government agency • All contributions and spending by candidates, parties, and political action committees (PACs) must be reported in federal elections • LIMITS • Limited contributions to candidates, parties, and PACs in federal elections • Limited spending by campaigns, parties, and PACs in federal elections • SUBSIDIZE PRESIDENTIAL ELECTIONS • Tax form allowed $1 contribution (now $3)

11. FECA afterBuckley v. Valeo FECA becomes law 1971: Federal Election Campaign Act (FECA) 1974: FECA amended 1976: FECA amended to comply with Buckley v. Valeo • DISCLOSURE • Created the Federal Election Commission, a government agency • All contributions and spending by candidates, parties, and political action committees (PACs) must be reported in federal elections • LIMITS • Limited contributions to candidates, parties, and PACs in federal elections • SUBSIDIZE PRESIDENTIAL ELECTIONS • Tax form allowed $1 contribution (now $3)

12. BCRA After FECA, Before BCRA 1) Major loophole of FECA: Soft money • Soft money = unlimited contributions to national parties to be given to state/local parties for “party-building” purposes (voter registration, mailings, ads) • No FECA limits on “party-building” contributions • National parties could then use soft money to influence elections

13. Figure 9–5 Congressional Campaign Committee Soft Money Spending, 1994–2002. Source: Federal Election Commission, “Party Committees Raise more than $1 Billion in 2002–2003,” press release, March 20, 2002, at, www.fec.gov, April 29, 2003. Adjusted by CPI, at ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt, January 15, 2003.

14. BCRA After FECA, Before BCRA 2) No regulation of issue advocacy ads • Interest groups could spend millions of unregulated contributions from corporate/union treasuries to produce their own ads to try to set the agenda to favorable or unfavorable issues for a candidate • The ads were not express advocacy because they never said “vote for” or “vote against” (known as the magic words test from Buckley v. Valeo)

15. Table 9–2  Some Frequent Issue Advertisers in 1999-2000 Presidential Primary

16. BCRA (McCain-Feingold) BCRA becomes law 2002: Bipartisan Campaign Reform Act Known as McCain-Feingold Campaign Finance Reform • BAN ON SOFT MONEY • No “party-building” money for parties • Exception: Levin amendment -- $10,000 per state and local party for voter registration • It can never accept money from corporate/union treasuries • DEFINES ISSUE ADVOCACY ADS AS ELECTIONEERING… THIS AFFECTS HOW THEY ARE PAID FOR • 60 days before a general election/30 days before a primary election… • Corporations (including incorporated nonprofits) and labor unions cannot run such ads using funds from their treasury. Unincorporated nonprofits cannot run such ads either if they use corporate or union funds to pay for them. • Individuals and PACs, including corporate and union PACs, can pay for these ads. However, such PACs cannot accept money from corporate/union treasuries.

17. BCRA (McCain-Feingold) BCRA becomes law 2002: Bipartisan Campaign Reform Act Known as McCain-Feingold Campaign Finance Reform • MILLIONAIRE PROVISION • If you are facing a millionaire, you have higher contribution limits. • NEW CONTRIBUTION LIMITS • See next slide

18. Table 7–4  Effects of the 2002 Campaign Finance Reforms

19. Sen. John McCain (R-AZ)Sen. Russ Feingold (D-WI)

20. McConnell v. FEC McConnell v. Federal Election Commission 540 U.S. 93 (2003) Docket Number: 02-1674 Decided: December 10, 2003 Argued: September 8, 2003 Question Presented • Does the "soft money" ban of the Campaign Finance Reform Act of 2002 exceed Congress's authority to regulate elections under Article 1, Section 4 of the United States Constitution and/or violate the First Amendment's protection of the freedom to speak? • Do regulations of the source, content, or timing of political advertising in the Campaign Finance Reform Act of 2002 violate the First Amendment's free speech clause?

21. McConnell v. FEC Conclusion With a few exceptions, the Court answered "no" to both questions in a 5-to-4 decision written by Justices Sandra Day O'Connor and John Paul Stevens. The government was justified in taking steps to prevent schemes developed to get around the contribution limits. Two excerpts from the majority opinion written by O’Connor and Stevens: “There is substantial evidence in these cases to support Congress’ determination that such contributions of soft money give rise to corruption and the appearance of corruption. For instance, the record is replete with examples of national party committees’ peddling access to federal candidates and office-holder in exchange for large soft-money donations.” “Money, like water, will always find an outlet."

22. After BCRA… The Current Situation Current concerns of reformers who want more changes • BCRA DOES NOT LIMIT INDEPENDENT EXPENDITURES • No spending limits as long there is no communication with the candidate’s campaign; if there is communication, it is considered an in-kind contribution to the candidate • Can be done by individuals, parties, PACs, 527s, etc. • Since big donors (corporations, unions, individuals) can’t give unlimited money to candidates (FECA) or parties (BCRA), they are now giving it to 527s • Can do electioneering (image and name), but not express advocacy (“vote for” or “vote against”) • No limits on contributions • Stay tuned as the Supreme Court and Congress deals with 527s… • Is this shift to independent expenditures good for democracy? • “Yes… less direct corruption of elected officials.” • “No… elections are more dominated by partisan, wealthy individuals.” • SCOTUS removed limits (CITIZENS UNITED V FEC, 2010) on independent expenditures that are not coordinated with candidates' campaigns. The 5-4 majority also struck down part of the 2003 McCain-Feingold law that barred union- and corporate-paid issue ads in the closing days of election campaigns. The ruling leaves in place a prohibition on direct contributions to candidates from corporations and unions.

24. After BCRA… The Current Situation Current concerns of reformers who want more changes • RISING COSTS OF CAMPAIGNS • See chart

25. Figure 9–4 Rising Campaign Costs in General Elections. Source: Federal Election Commission, “Congressional Campaign Expenditures Total $772 Million,” January 2, 2003, at www.fec.gov.

26. After BCRA… The Current Situation Current concerns of reformers who want more changes • EASIER FOR INCUMBENTS TO RAISE MONEY FROM PACS • See chart

27. Figure 9–6 PAC Money Favors Incumbents. Source: FEC, “PAC Activity Increases for 2002 Elections,” March 27, 2003, at www.fec.gov.

30. After BCRA… The Current Situation Current concerns of reformers who want more changes • DECREASE IN COMPETITION • See chart

31. Figure 9–3 U.S. House Incumbents Reelected, 1946–2004. Source: Harold W. Stanley and Richard G. Niemi, eds., Vital Statistics on American Politics 2001–2002 (CQ Press, 2001), pp. 53–55. 2004 update by authors.

32. Let’s Re-examine… Possible Reform Strategies Available to Legislators There are three general strategies that legislators could try to use. What is used today? • Place limits on… • persons/groups giving money to candidates (YES) • persons/groups doing independent expenditures (running their own campaigns, separate from candidates’/parties’ campaigns) (NO) • candidates receiving money (YES) • candidates spending money (NO) • parties receiving money (YES) • parties spending money (NO) • Require disclosure on… • sources of candidates’ money (YES) • uses of candidates’ money (YES) • Give government subsidies to… • presidential candidates (YES) • other candidates (NO) • parties (NO)

33. Sources Government by the People – 21st Edition www.oyez.org www.opensecrets.org www.washingtonpost.com

34. Essential Question #4 • Explain recent efforts proposed and taken to reform campaign finance. Explain why reform has been so difficult to achieve.

35. Essential Question #6 • Explain the status of each of the following elements of campaign finance: • personal wealth of the candidate • hard money • soft money • PAC money • issue advocacy • independent expenditures

42. The latest on 527s… • The Republicans have had more success with raising hard money under the limits. • The Democrats have historically relied more on large donors. See chart below as well. • Sen. Reid (D-NV) blocked a Republican effort to put limits on 527s. • There is a pending case before the Supreme Court to put limits on 527s.