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Financing the 2012 Election
By David B. Magleby
Brookings Institution PressCopyright © 2014 The Brookings Institution
All rights reserved.
The 2012 Election as a Team Sports
DAVID B. MAGLEBY
Continuing a trend, the 2012 federal election saw more money raised and spent than any other election in U.S. history. Although not all expenditures are reported, our best estimate is that at least $8 billion was spent in the 2012 federal elections. This estimate includes what we know from candidate, party committee, and interest group disclosure reports to the Federal Election Commission (FEC), the Internal Revenue Service (IRS), and interviews we conducted with several interest groups active in 2011 and 2012. The $8 billion spending estimate for federal elections constitutes a more than $1.6 billion increase in inflation-adjusted dollars over 2008 (a 25 percent rise) and a more than $3 billion increase over 2004.
The substantial increase of spending in 2012 when compared to 2008 and 2004 is all the more noteworthy given that the country had experienced a major recession and that only one party had a contested presidential nomination. Part of the rise in overall spending was attributable to increased spending in congressional elections in 2012 over previous years. Contrary to these trends, spending by presidential candidates was down by $455 million in 2012 compared with 2008, in part because only one party had a contested nomination and the cycle was slower to start than in 2008. However, the dip in presidential candidate spending was largely invisible to voters because outside groups and the national party committees more than made up the difference. Looking just at the spending in the presidential race in 2012, we estimate a total of more than $2.3 billion was spent by candidates, parties, individuals, and groups, with Mitt Romney and allies at near parity in spending with Barack Obama and allies.
The most important change in the way the 2012 election was financed was the return of outside money on a large scale to federal elections. Outside money is campaign spending by individuals, groups, or parties done outside the control of the candidates or their campaigns. In 2012, groups and parties acting independently spent at least $1.7 billion in support of or opposition to federal candidates. Spending by groups other than the candidates and parties was subject to fewer restrictions than in previous elections. As Anthony Corrado explains in detail in chapter 2, the regulatory environment going into the 2012 election had been reshaped both legally and psychologically by the Supreme Court rulings in Citizens United v. Federal Election Commission and SpeechNow.org v. Federal Election Commission. These two cases, combined with the court's 2007 decision in Federal Election Commission v. Wisconsin Right to Life, Inc., in which the court reversed its decision in McConnell v. Federal Election Commission regarding electioneering communications, or what are often called "issue ads," meant individuals and groups had much greater latitude in spending money to influence the outcome of federal elections.
Presidential contests traditionally take center stage in presidential election years, and this was again true in 2012. Owing in part to the slow economic recovery the country was experiencing, Republicans were optimistic about winning back the White House, and some pre-election modeling projected that the GOP would quite likely win the presidency. It was also uncertain whether a second Obama candidacy could achieve the same level of grassroots enthusiasm and fundraising success as it had experienced in 2008. Despite these possible limitations, the Obama campaign was expected to spend in excess of $1 billion in the 2011–12 cycle. At the time, some questioned whether that would be possible given the struggling economy and some evidence of a demoralized base in the Democratic Party.
In congressional contests, most attention was focused on a few high-profile U.S. Senate races. Given that the Democrats were defending twenty-three seats, several of which were in historically Republican states, there was a real possibility that the Democrats could lose their majority. Accordingly, some interest groups such as the League of Conservation Voters (LCV), an environmental group that supported Democrats, made Senate races their highest priority for independent expenditures in 2012. If Obama were to be defeated, these interest groups sought to build a "firewall" of forty-one Democratic Senate votes, which would be enough to block filibusters designed to weaken environmental laws or regulations. As it turned out, the LCV and other pro-Democratic groups not only helped reelect Obama but also helped Democrats win a net gain of two Senate seats, giving the Democrats fifty-five senators, well above the forty-one-seat firewall.
The GOP went into the 2012 election with 242 U.S. House seats, while the Democrats held 193 seats, meaning the Democrats would need a net gain of twenty-five seats to retake the majority. Democrats had suffered major losses in 2010, with Republicans picking up a net gain of sixty-three seats and the majority. Redistricting following the 2010 census had also hurt Democrats. Republicans did well in state legislative and gubernatorial races in 2010, allowing them to control the redistricting process in eighteen states while Democrats had control in only in six. As the political scientist Gary Jacobson has written, "After redistricting, there were 11 more Republican-leaning districts, 5 fewer Democratic-leaning districts, and 6 fewer balanced districts." Given these factors, few prognosticators saw the Democrats as having a serious shot at winning a House majority in 2012. Republicans had a net loss of 8 seats but were able to retain a 234-201 seat majority in the House after the election.
Republicans' success in House elections in 2010 and 2012 has meant that they have controlled at least one congressional chamber during more than half of the Obama presidency. In an era of a sharply polarized Congress, the sense that control of Congress is possibly up for grabs has been a frequent refrain in fundraising appeals to supporters of both parties.
Given the competitive nature of presidential contests since at least 2000 and the possibility of a change in party control of one or both houses of Congress, how did 2012 compare with earlier cycles in overall spending? Figure 1-1 plots the inflation-adjusted candidate expenditures in presidential, House, and Senate elections by election cycle.
Inflation-adjusted spending by presidential candidates rose only gradually between 1976 and 2000, in part because of public financing. Campaign finance reforms in the 1970s established a system of partial public financing of presidential nomination contests through a system of partial matching funds to candidates participating in the system and full public funding of party nominees through a grant, which if accepted, meant that candidates would cease raising money for their campaigns. The widespread candidate acceptance of public funding appears to have had the effect of constraining expenditures by candidates in presidential races. In 2008 and 2012, as presidential candidates abandoned public funding and its accompanying spending limits, their combined presidential candidate spending exceeded House candidates' spending, something that had not been true before 2008. Spending by House candidates roughly doubled between 1976 and 2000, and spending by Senate candidates showed more variability, in part owing to the different mix of states that held Senate elections in different cycles.
It is important to note that party soft money (the unlimited but disclosed contributions parties could raise and spend, banned after the 2002 elections) and so-called interest group "issue advocacy" spending, as well as independent expenditures in presidential and congressional races, are not included in this figure. Interest groups and individuals have long spent money in federal elections beyond their contributions to candidates, party committees, and political action committees (PACs). They have done this by making expenditures themselves independent of the candidates. Between 1996 and 2002 they also exploited an unrealistic definition of electioneering to claim that expenditures they were making were about issues and not elections and therefore not subject to disclosure. This latter type of spending was called "issue advocacy."
In the 2011–12 election cycle, $1.224 billion was spent by House candidates, a 29 percent increase over 2008. Aggregate spending by House candidates increased in 1992, after which it leveled off, only to rise again in 2000 by about $100 million. A similar increase occurred in 2004. The 2008 cycle saw a 43 percent increase in House candidate expenditures, with $948 million spent by House candidates. Thus the trend is clearly for House candidate spending in a presidential election year to rise substantially over the previous cycle.
Aggregate spending by Senate candidates shows more ups and downs, which is not surprising given the different mix of states with Senate races in any given election cycle. But spending by House and Senate candidates in the aggregate was at an inflation-adjusted all-time high in 2012 of $2.059 billion, nearly double the $1.097 billion spent in 2000.
Compared with spending in House and Senate contests, spending in presidential races shows quite a bit of stability between 1976 and 2000, with aggregate expenditures in real dollars ranging from $225 million to $452 million in 2012 dollars. As presidential candidates abandoned public funding and the spending limits that came with those funds, presidential candidate spending nearly doubled between 2000 and 2004 and nearly doubled again between 2004 ($863 million) and 2008 ($1.7 billion). Presidential candidate spending in 2012 was $1.418 billion. As noted, this dip in 2012 occurred because only one party had a contested nomination and not due to presidential candidate spending, which was up in 2012.
The money spent by federal candidates was raised under the contribution limits of the Federal Election Campaign Act (FECA), which were in place from the 1970s through the 2002 election cycle. Those individual contribution limits were raised by the Bipartisan Campaign Reform Act (BCRA) and took effect in the 2004 election cycle. BCRA essentially doubled the individual contribution limits and indexed them to inflation while leaving PAC contributions unchanged and not indexed to inflation. Table 1-1 shows the contribution limits in place for the 2011–12 election cycle.
One reason why candidate expenditures have risen since 2000 is that BCRA doubled contribution limits and indexed them to inflation, permitting candidates to raise more money from donors who want to give more than $2,000, the pre-BCRA limit, in an election cycle. As we demonstrate in this book, maxed-out donors, each of whom could give up to $5,000 to a candidate in 2012, have become an increasingly important element in building a viable candidacy for the presidency—and, increasingly, for the U.S. Congress. These maxed-out donors are likely to play an even greater role in the future, as the Supreme Court in 2014 declared unconstitutional the aggregate candidate and party contribution limits in McCutcheon v. Federal Election Commission.
The contribution limits for PACs have remained unchanged since 1974. Under FECA, PACs were allowed to contribute five times as much to a candidate as an individual was allowed to contribute. But since the 2002 BCRA doubled individual contribution limits and indexed them to inflation, an individual could contribute half as much as a PAC in 2012. Yet contributions to candidates by individuals and PACs, while important, are only part of how elections are financed. Of the $8 billion spent on federal elections in 2012, only 40 percent was raised and spent by candidates, the remainder being raised and spent by party committees and outside groups acting independently of the candidates.
Money raised for campaigns is not of equal value. This is true not only when the money is spent but also in how it can be spent. As Charles R. Spies, general counsel to and treasurer of the pro-Romney Super PAC Restore Our Future, observed, "The timing of money can be more important than the amount." Early money is, generally speaking, more valuable to a candidate than late money. Early money can be invested in campaign infrastructure, which takes time to develop and cannot be done as effectively late in the campaign. Early money may also help to reinforce the impression of candidate viability, as John Green discusses in chapter 3. In 2011–12 the Democrats had an incumbent candidate for president seeking an uncontested nomination. Republicans, on the other hand, had a multicandidate field, and Romney was not the presumptive winner until former Pennsylvania senator Rick Santorum dropped out in April. Candidates are preferred recipients of contributions because they can spend more efficiently and because their spending is part of a campaign strategy and focused message. As we discuss in this book, candidates and party committees working in coordination, like candidates on their own, are eligible for more favorable rates for television ads, and party committees are eligible for more favorable mail rates. Had the McCutcheon v. Federal Election Commission ruling been in effect in 2012, an individual could have given $5,000 to all general election federal candidates and $30,800 to each of the three party committees, plus $10,000 to each state party, $2,500 to other primary election candidates, and $5,000 to each PAC. That is, an individual could give in excess of $800,000 to candidates and parties alone and much more than that if the donor also wanted to give to multiple PACs.
How the Money was Raised in 2011–12
How was the $8 billion raised to finance the 2012 election? Most of the money to fund federal elections comes from individuals. In aggregate figures, in 2012 individuals gave 64 percent of all funds contributed to federal candidates, compared with 53 percent in 2000, the last presidential election before passage of BCRA. Individuals play an even larger role in funding presidential candidates. Of all money raised by the presidential candidates in 2011–12, 72 percent came from individuals. This compares with 77 percent in 2008 and 73 percent in 2004. President Obama, who set records for fundraising from individuals in 2007–08, ran uncontested for the Democratic nomination in 2012. His receipts from individuals in 2012 were $715 million compared with $656 million in 2008. However, in 2008 all other Democratic candidates seeking the nomination raised $256 million from individuals. More broadly, the amount of money raised from individuals has risen dramatically since passage of BCRA in 2002. That legislation, by increasing the amounts individuals could give while holding PAC contributions constant, was intended to increase the role played by individuals in funding federal elections. The act was successful in this regard, as the number of reported contributions to the FEC has risen from 1.6 million in 2000, the last presidential election before BCRA took effect, to 2.5 million in 2004, 3.4 million in 2008, and 3.5 million in 2012.
In addition to doubling the individual contribution limit, BCRA banned party soft money, which had become a way for candidates to circumvent individual contribution limits by encouraging donors to give unlimited amounts to their party committees. In the 2000 election, for example, the party committees collectively spent nearly $500 million in soft money on party activity in presidential, congressional, and state and local races. Since BCRA the party committees have exploited the higher individual contribution limits and raised substantially more hard-money contributions, which are limited as to source and amount, than they had before (a $129 million difference). Contrary to the predictions of some that banning soft money was a form of "suicide" for party committees because they were giving up their soft-money pipeline, the two national party committees raised as much in 2012 in hard money as they did in 2000 in hard and soft money combined. In 2000 the Democratic National Committee (DNC) and Republican National Committee (RNC) raised $956 million in inflation-adjusted hard and soft money, compared with $942 million raised by the two committees in 2012 ($403 million by the DNC and $539 million by the RNC). This includes money raised in joint fundraising with their presidential nominees. The law allows presidential nominees to form joint fundraising committees, which in turn may raise funds jointly from individuals wishing to give to the candidate and national party committee.
Excerpted from Financing the 2012 Election by David B. Magleby. Copyright © 2014 The Brookings Institution. Excerpted by permission of Brookings Institution Press.
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