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Grant ParkThe Democratization of Presidential Elections 1968–2008
By Candice J. Nelson
BROOKINGS INSTITUTION PRESSCopyright © 2011 Brookings Institution
All right reserved.
Chapter OneCampaign Finance
The passage of the Federal Election Campaign Act of 1971 began a process that fundamentally reformed the way presidential campaigns in the United States are financed. Beginning with the 1976 election, presidential candidates were, for the first time, eligible for partial public funding of their nomination campaign and full public funding of their general election. Public funding enabled candidates who did not have personal wealth, access to wealthy contributors, or high name recognition to compete for the presidency. This chapter examines the campaign finance process between 1976 and 2008, the costs of presidential campaigns during that period, and how the changes in campaign finance between 2000 and 2008 affected those costs.
The Campaign Finance Process
The Tillman Act, passed in 1907, prohibited corporate contributions in federal elections, and the Taft-Hartley Act, passed in 1947, extended the prohibition to contributions from labor unions. The Federal Corrupt Practices Act, requiring House and Senate candidates to disclose contributions and expenditures, was passed in 1925, but it was not strictly enforced and was not particularly effective in regulating campaign finance in federal elections. When President Kennedy was elected in 1960 he expressed interest in reforming the campaign finance system, but his assassination in 1963 interrupted those efforts. Legislation to reform the campaign finance system was considered in Congress during the 1960s, but no law was enacted. It was not until the early 1970s that major legislation to replace the Federal Corrupt Practices Act was passed.
In late 1971 and early 1972 two pieces of campaign finance legislation were enacted into law—the Federal Election Campaign Act of 1971 (FECA) and the Revenue Act of 1971. The FECA required greater disclosure of campaign contributions, including requiring political parties and candidates for federal office to report both total expenditures and the names, addresses, and occupations of contributors. The act also established regular disclosure reports of contributions and expenditures. The Revenue Act of 1971 established the Presidential Election Campaign Fund, which was to be funded by voluntary tax checkoffs, with the expectation that public funding of presidential campaigns would follow.
The disclosure requirements of the FECA of 1971 shed new light on the funding of presidential elections. Both President Nixon's 1972 reelection campaign, the Committee to Re-Elect the President (CREEP), and Senator McGovern's campaign benefited from the largesse of wealthy contributors, with some contributors to the Nixon campaign giving as much as $2 million to the campaign. The Watergate investigation that examined the practices of CREEP also found numerous instances of illegal corporate contributions.
Campaign Finance Rules
The Watergate revelations led to calls for new campaign finance regulations. The 1974 amendments to the FECA established the campaign finance rules that largely exist today. The amendments established contribution limits for individuals, political parties, and political action committees (PACs). The amendments also established voluntary public funding of the presidential general election, partial public funding of the nomination process, and public funds for the presidential nominating conventions. Limits were set on the amount of money that could be spent on the nomination and in the general elections by candidates accepting public funding. The nomination limit was $10 million and the general election limit was $20 million, both indexed for inflation. Finally, the amendments created a new federal agency, the Federal Election Commission, to administer the FECA.
The 1976 election was the first presidential election under the new campaign finance system. The regulations that governed the presidential campaign process during the 1976 elections continue today. First, candidates choose whether or not to accept partial public funding during the nomination process and then whether or not to accept full public funding in the general election. Candidates are not required to accept partial public funding during the primary process or full public funding in the general election, and agreeing to public funding for one election period does not commit candidates to public funding for the other.
To qualify for partial public funding during the nomination process candidates have to raise $5,000 in each of twenty states in amounts of $250 or less from individuals. Once a candidate qualifies for partial public funding, he or she receives matching funds from the federal treasury. For every $250 raised from individuals, a candidate receives $250 in funds. Candidates accepting partial public funding must also accept both state-by-state spending limits and an overall spending limit for the nomination period. State-by-state spending limits are determined by a formula based on the state's population. The overall primary spending limit is 50 percent of the general election spending limit. To continue to qualify for matching funds during the nomination period candidates must receive at least 10 percent of the vote in two consecutive primaries or caucuses.
During the general election the Democratic and Republican candidates—the major party candidates—qualify for full public funding once they are certified at the party's national nominating conventions as their parties' nominees. Third-party candidates qualify for some public funding in the general election only if their party's candidate received 5 percent or more of the popular vote in the previous presidential general election. First-time third-party candidates whose party did not exist in the previous election receive public funding only after the election, making public funding essentially useless to them during the election itself.
The Early Years of the New Rules
While the campaign finance process on its face seems fairly straightforward, it took only a few election cycles for problems to surface. First, at the time the 1974 amendments to the FECA were passed, the threshold for qualifying for public funds was seen as a financial hurdle sufficient to weed out third-party candidates and marginal candidates unlikely to receive their party's nomination. However, less than a decade later third-party candidates began to qualify for federal funds. Sonia Johnson, a candidate of the Citizens Party, received matching funds in the 1984 presidential election. Lyndon LaRouche, a perennial candidate for president, also qualified for federal funds in the 1984 election. In 1992 John Hagelin, the candidate of the Natural Law Party, and Lenora Fulani, the New Alliance Party candidate, both received federal funds. Even major party candidates with little chance of receiving their party's nomination were able to qualify for federal funds. For example, in 2008 Democrats Mike Gravel and Dennis Kucinich both received federal matching funds—Gravel about $215,000 and Kucinich slightly over $1 million; Republican candidates Duncan Hunter and Tom Tancredo also received matching funds, Hunter $453,000 and Tancredo about $2.2 million. Ralph Nader, running as an independent in 2008, received almost $900,000 in federal matching funds.
A second problem that quickly arose was the state-by-state spending limits. These limits are determined by the state's population but do not take into account the state's importance in the nomination process. For example, the earliest primary and caucus states, New Hampshire and Iowa, had relatively low spending limits in 2008—$841,000 and $1.5 million, respectively, despite their prominence in the nomination process. California, on the other hand, a state that in recent years has played a minor role in the nomination process, had a spending limit in 2008 of just over $18 million.
Despite these unanticipated consequences of the 1974 amendments, the new campaign process worked as legislators had hoped when drafting the legislation. Wealthy donors were removed from the campaign finance process, there was transparency in contributions and expenditures, and lesser known candidates were able to compete on a relatively even playing field with better known candidates. Primary matching funds, coupled with reforms in the nomination process, allowed lesser known candidates to slowly become known to voters over the course of the nomination period. For example, Jimmy Carter was a relatively unknown Georgia governor when he finished second to "undecided" in the Iowa caucuses in 1976. While not a well-funded candidate initially, his primary and caucus successes led to campaign contributions, and the contributions, matched by public funds, enabled Carter to build a campaign organization, gain name recognition and support among the Democratic primary electorate, and eventually secure his party's nomination.
The former Colorado Democratic senator Gary Hart is an even better example of the confluence of the campaign finance process and the nomination process in the 1970s and 1980s. Walter Mondale, who had been vice president during Jimmy Carter's presidency, was widely seen as the likely Democratic presidential nominee in 1984. However, when Gary Hart finished second to Mondale in the Iowa caucuses and then went on to win the New Hampshire primary, Hart, virtually unknown before the Iowa caucuses, saw money pour into his campaign. Because of matching funds and a nomination process that extended from February until June, Hart was able to compete financially against the better funded Mondale campaign through the final primaries in California and New Jersey in early June. While Mondale eventually secured the nomination, federal matching funds allowed Hart, a little-known candidate at the start of the primary season, to compete with the party's front-runner for the nomination.
The Breakdown of the Campaign Finance Process
The symbiotic relationship between the nomination and campaign finance processes began to break down with the front-loading of the nomination process. As there became less time between primaries, lesser known candidates had less time to use matching funds to develop name recognition and support among voters. For example, in 1988 Michael Dukakis, the eventual Democratic nominee, won the New Hampshire primary and then a series of state contests on March 8, the first Super Tuesday. As the field rapidly narrowed, other lesser known candidates seeking the Democratic nomination that year, such as the former Arizona governor Bruce Babbitt, had only weeks (rather than months) to use matching funds to introduce themselves to Democratic primary voters. In 1992 Bill Clinton essentially wrapped up the Democratic nomination in early March, leaving other matching-fund recipients that year—Bob Kerrey, Tom Harkin, Paul Tsongas, and Jerry Brown—unable to extend their campaigns into the spring.
In 1996 the presidential campaign finance system itself began to break down. Steven Forbes, heir to the Forbes magazine dynasty, decided to seek the Republican Party's nomination but not to accept partial public funds in his run for the nomination. Before 1996 only one major party candidate had declined partial public funding. John Connolly, seeking the Republican Party's nomination in 1976, declined partial public funding. 8 Forbes ultimately lost the nomination to Senator Robert Dole but, in the process, forced Dole to spend the limit for the nomination process. As a result, when Dole became the presumptive nominee of the Republican Party in March, he was legally not allowed to spend money until August, when he became the official nominee. Meanwhile, President Bill Clinton, seeking reelection, had no primary opponent and thus had money to spend between the end of the primaries in April and the Democratic Convention in August.
To bridge the gap between when Dole secured the Republican nomination in March and when he became the official nominee of the party in August, the Republican Party ran a series of issue ads to support Dole's nomination. Issue ads first surfaced during the 1993 debate over President Clinton's health care proposals, but in 1996 the ads moved from a focus on policy to commercials for or against candidates for office. Because the Supreme Court, in Buckley v. Valeo, had ruled that political commercials that explicitly advocated for the support or defeat of a candidate, using the so-called magic words (vote for, vote against, elect, defeat), had to be paid for with hard money, political parties and interest groups were able to use soft money, described later in this chapter, to run ads that did not explicitly advocate for or against candidates. The Republican Party took advantage of this loophole in campaign finance law to counter ads that the Clinton campaign ran between March and August of 1996.
When Governor George W. Bush of Texas decided to seek the Republican Party's nomination in 2000, he learned from Dole's experience in 1996. To ensure that he had enough money to be competitive throughout the nomination period, Bush decided to opt out of partial public funding. His decision paid off; during the second quarter of 1999, six months before the primaries and caucuses would begin, it was rumored that Bush would report raising between $21 million and $23 million. In fact, he raised $35 million during the quarter, at that time the most money that any presidential candidate had ever raised in a single quarter. The primary spending limit for 2000 was $33.5 million. Over the summer of 1999 most of Bush's opponents dropped out of the race for the Republican nomination, often citing their inability to compete with Bush's fundraising prowess.
Four years later Howard Dean, then the governor of Vermont, raised $14 million during the third quarter of 2003. That was the most money any Democratic candidate for the nomination had ever raised in one quarter. Emboldened by his fundraising success, Dean announced that he would forgo partial public funding during the upcoming nomination contest. Massachusetts Senator John Kerry, also seeking the Democratic nomination in 2004, believed that to be competitive with Dean he too would have to opt out of partial public funding during the nomination process. In December of 2003 Kerry took out a $6 million mortgage on his Beacon Hill home to rescue his primary campaign from the brink of bankruptcy. In the end, Dean raised $40 million, yet he was out of the primaries in February, after losing both the Iowa caucuses and the New Hampshire primary. Kerry, the eventual Democratic nominee, raised $234.6 million during the nomination period; President George W. Bush, seeking re-election, raised $269.9 million. With both major party nominees opting out of the partial public funding process, the 2004 election, in effect, marked the end of partial public funding during the nomination period, and it was widely expected that no serious candidate for the presidency in 2008 would accept public funds during the nomination contest.
For the 2008 presidential election cycle the limit on spending during the nomination period for candidates who accepted partial public funds was $42.05 million. Given the amount spent by Bush and Kerry in 2004, almost all first-tier candidates decided to opt out of the public funding process. Only former Democratic vice presidential candidate John Edwards accepted matching funds, though several second-tier candidates—Senators Christopher Dodd and Joe Biden, Representative Dennis Kucinich, and the former Alaska senator Mike Gravel on the Democratic side and Republican Representatives Duncan Hunter and Tom Tancredo—did accept matching funds.
The final nail in the coffin for the public funding of presidential elections occurred during the general election. Then senator Barack Obama, because of his fundraising successes in 2007 and during the primaries in 2008, decided to opt out of full public funding during the general election. The 2008 election was the first time a major party candidate declined public funding in the general election, though Ross Perot, running on the Reform Party ticket in 1992, privately financed his campaign. The general election spending limit for candidates who accepted public funding in 2008 was $84 million. Given that he raised $454 million during the nomination period, Obama was reasonably confident that he could raise more than $84 million for the general election. By opting out of public funding, he was unconstrained by the spending limit. In the end, Obama's calculations proved correct. He raised over $300 million during the general election, including a record $150 million in September alone. In total, Obama spent $745 million on his successful presidential bid, dwarfing both what Senator McCain was able to raise and spend and what other presidential candidates had done in the past. Reflecting on the presidential finance system after the election, McCain campaign manager Steve Schmidt said, "Public financing is over." Schmidt estimated that the Republican Party nominee in 2012 would need to run "really close to a billion-dollar campaign" to be competitive with a likely Obama reelection campaign.
Excerpted from Grant Park by Candice J. Nelson Copyright © 2011 by Brookings Institution. Excerpted by permission of BROOKINGS INSTITUTION PRESS. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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