printable banner

U.S. Department of State - Great Seal

U.S. Department of State

Diplomacy in Action

Campaign Finance in U.S. Elections

R.Sam Garrett, Specialist in American National Government, Congressional Research Service (CRS) and Adjunct Professorial Lecturere and Research Fellow, Center for Congressional and Presidential Studies, American University
Washington, DC
March 16, 2012

1:30 P.M., EST


MODERATOR: Good afternoon, and welcome to the Foreign Press Center. Today, we have with us Mr. Sam Garrett, who is a specialist at CRS and he’s also a professor at American University. And he is going to brief today on campaign finance in U.S. elections.

Mr. Garrett.

MR. GARRETT: Well, good afternoon, everyone. Thanks very much for the invitation, and I’m pleased to be here. I should note from the outset that, given my CRS affiliation – the Congressional Research Service – I should note that the comments today are my own and don’t necessarily reflect the views of CRS.

And I understand that what would be of interest to you would be a brief overview, both historically and in a public policy sense, of campaign finance in the U.S. So I’ll spend just a few minutes going over some of the basics, and then, course, I’ll be glad to answer your questions.

So one thing that might be helpful for an international audience would be to start with what I think are just a few unique facets of the American system. And I know that some of this is probably known to you, but for others perhaps not. So let me go through this quickly.

Well, there might be a lot of perspectives on this, but from my own perspective, I would say what’s really unique about the American campaign system is, compared with many other Western-style democracies, first of all is the candidate-centered nature of American campaigns. Of course, we don’t have a parliamentary system. And institutionally, and in a campaign management sense, political parties tend to play less of a role here than they would in many other countries. Now of course, campaigns are organized around the parties and the parties do play a very active role in some respects, including in some cases with respect to fundraising. But the individual campaign decisions, the campaign style for the most part, that tends to be a very individualized affair, centered around individual candidates and their own campaign organizations. And for the most part, the folks that are working for the campaign, they’re actually employed by the campaign either directly or they’re professional political consultants working for several campaigns. But there are limits, unlike in some other countries, on what political parties can spend on campaigns, and that, in and of itself, provides some level of autonomy to campaign organizations that we wouldn’t see in other settings. Also, of course, we have the First Amendment, which – to the Constitution, which limits the degree to which political spending can be regulated. And I’ll talk about that in a moment.

I should say there’s a fair amount of impression, I think, in the media and elsewhere that the current election cycle has marked drastic changes in the style of campaigning or the style of fundraising. To some degree, that’s correct, but to some degree not. So for example, the individual candidate-centered nature of campaigns I mentioned a moment ago, that’s really not a new phenomenon. That phenomenon has been developing since approximately the 1950s. And starting in at least the 1960s or so, campaign-oriented fundraising, as opposed to party-oriented fundraising, has increasingly been the norm. And one reason we see the increased need for money and for fundraising, starting around mid-century, was the rise of television and the cost of political advertising – and radio as well, but particularly television advertising. Political advertising tends to be the largest budget item in a competitive campaign, certainly in a presidential or a Senate race. In a congressional race, you wouldn’t necessarily be looking at as much broadcast advertising, particularly if it’s in a rural area where they don’t have their own media market. But even there, something like direct mail, for example, would typically be one of the larger expenses. And so especially as the cost of media has risen and the importance of having media as opposed to traditional retail or door-to-door campaigning has become important, the role of money has become increasingly important.

And typically, American campaigns tend to be fairly expensive. As you all probably know, the Obama campaign in 2008 raised about $750 million. The McCain campaign raised between $3- and $400 million. And in general, whatever the current election cycle is tends to be more expensive than the previous election cycle. The average winning House and Senate candidates typically require fairly robust fundraising. In recent elections, the average winning Senate candidate has raised between $7- and $8 million. The average winning House candidate has raised between $1- and $2 million. Now of course, those figures can vary a lot. Those are just averages. Some candidates can win with much less; some candidates can lose but with spending a lot more. And there is in some cases a tradition of wealthy self-financed candidates, as we call them, in the United States. Sometimes, those candidates are successful but sometimes not. It’s – by no means is money a guarantee to success in the election.

Let me talk for just a moment before we get to questions about some of the policy background as well that might be helpful to you. In the modern sense, campaign finance policy in the United States really starts in the early and mid-1970s, in particular with passage of what we call FECA, the Federal Election Campaign Act. And there were predecessors to FECA as early as the 19-teens, and even before that, that required basic disclosure. And disclosure in the federal campaign finance policy says – really just means reporting of information and public availability of information. But really it’s not until the 1970s that we get a fairly robust disclosure, reporting, and limitation system like we would recognize today, through FECA. FECA’s originally enacted in the early ’70s, and then there are substantial amendments in ’74, ’76, and ’79.

And among other things – by the way, FECA establishes the presidential public financing system, and that is one aspect of American elections in the financial sense that does tend to be somewhat similar to other countries. And that is, in presidential elections, we do have an optional system of publicly financed campaigns. Now, one of the big questions for the current election cycle is whether that system will remain robust or not. Barack Obama was the first person ever elected president without fully participating, in fact without participating at all in the presidential public financing system since that system came into being in the 1970s. And thus far, as far as I know, only one candidate has elected to participate in 2012. It’s not clear at this point whether other candidates will, but it appears fairly unlikely. Even supporters of the public financing system generally argue that the current limits associated with the system and the current financial benefits available are not sufficient to compete against a robustly privately-financed candidate. So the future of public financing is a question.

But another major topic, of course, that’s on people’s minds for 2012 is the impact of the Citizens United decision. The Citizens United case was a Supreme Court decision from January of 2010. And I should say here I’m focusing more on the policy context than the legal one, as I’m not a lawyer. But the basic thrust of Citizens United is that it permitted corporations and unions for the first time in modern history to use their treasury funds to spend on elections. Previously, they could have formed what are called PACs, political action committees, and they still can do so. And PACs were a vehicle, and are a vehicle, for making campaign contributions and for making what are called independent expenditures, that is expenditures that often take the form of political advertising – ads, for example, that call for election or defeat of a candidate, but are done independent from the campaign. So these are independent expenditures, or IEs.

And post-Citizens United, corporations – the case really only deals with corporations, but it’s generally accepted that it also implicates unions. So, post-Citizens United, corporations and unions are now able to use their treasury funds to make independent expenditures. They’re not able to make contributions from their treasury funds. So if a corporation or a union wanted to make a contribution, they would still have to form a PAC, and they would still have to use voluntary contributions. The PAC would still have to raise voluntary contributions to actually contribute to candidates.

So it’s never been the case that a traditional PAC could be a source simply for the corporation to use its Treasury funds to give money to the PAC and then that would somehow make the corporate expenditure acceptable. Really, the only thing that corporation or a union can do with respect to a PAC, especially in a pre-Citizens United environment, is provide minimal administrative support, essentially, to keep the PAC going. But any money that the PAC spends on contributing has to be raised from voluntary contributions subject to limits.

Now, one of the developments following Citizens United has been the development of a different form of PAC called Super PACs. This is a colloquial term; they’re also called independent expenditure-only committees. Now Citizens United didn’t – technically it didn’t address Super PACs. Another case called Speech Now, which was a lower court case but relied heavily on the Citizens United precedent, led to the development of what we would now recognize as Super PACs. And the difference essentially between a Super PAC and a traditional PAC is that a traditional PAC, of course, is subject to contribution limits in FICA, so $5,000 per election, for example.

A Super PAC is assumed by definition to only be making independent expenditures. And so per Citizens United, if a corporation or a union wanted, for example, to make an independent expenditure, it could do so directly from its treasury. It could go purchase the ad itself, for example. Or it might choose to give the funds to a Super PAC and the Super PAC could then do that as well. Of course, individuals, if they wanted to, could also contribute to the Super PAC.

So a Super PAC should not, under the current requirements, be making contributions to candidates. Rather, they’re only out there doing independent expenditures. Now Super PACs are a form of political committee. Political committees include party committees, candidate committees, and PACs. So these are the entities that are primarily regulated under FECA, the Federal Election Campaign Act, and by FEC regulations.

So Super PACs do in fact have to comply with the other requirements in FECA. They don’t have to reply – they don’t have to comply with contribution limits, but they do have to report regularly to the FEC, they have to disclose their donors. One issue that has received some attention lately is that it is possible there are some cases in which donors to Super PACs are not being disclosed. That is most likely the case if you have a contribution that is being routed through another source. So for example, if a corporation were giving to a trade association and the trade association gave to the PAC, if – when the corporation made that contribution to the trade association – if it did so in a way that were unrestricted, that is, it made the contribution and didn’t designate it specifically for independent expenditures, then the trade association, in giving to the Super PAC, would not have to disclose the corporation as the individual – as the original donor source.

Now that scenario isn’t unique to the post-Citizens United environment. And in fact, a lot of the current topics of note in the media are not necessarily unique to the post-Citizens United environment. But given Citizens United, it’s now possible for new players to come to the table, if you will. So in particular, what that means is corporations and unions now have options for spending that they previously did not. And by the same token, while individuals would have been free to spend as much as they wanted previously on independent expenditures, now the Super PAC is there as another vehicle for them if they want to take advantage of it. And so that’s where you’ve seen some of the attention lately.

I think that is – that pretty much wraps up my comments. Is that sufficient? Okay.

MODERATOR: Before you’re called on, please make sure that you state your name and the organization you’re from. Thank you.


QUESTION: Thank you. Betty Lin of the World Journal. Can foreign money slip into Super PACs? And how does FECA regulate that, or is there any regulations? And also, how Super PACs impact on the Senate and House elections? Like in the past, people tend to out-seat the speakers or majority leaders. And will this make more difference on that? Thank you.

MR. GARRETT: Okay. The question of foreign money is one that comes up fairly often. In general, foreign money is prohibited in U.S. elections. So if one makes – wants to make a contribution, for example, he must be a U.S. citizen or a green card holder, a permanent resident alien. Foreign – U.S. subsidiaries of foreign corporations can have PACs, but the decision-making about what the PAC is going to do essentially has to be under the control of U.S. citizens or green card holders. So I can’t say whether or not it’s absolutely impossible, for example, that foreign money would be implicated in a Super PAC scenario, but there are existing prohibitions that would seem to preclude it.

In terms of your second question, I should say, given my day job, I’m really not able to critique individual races. But one thing I’ll say in general is that I think the presence of Super PACs, regardless of the kind of race we’re talking about, whether it’s a congressional race or a presidential race, to some degree does add some – less predictability to the environment, and that you now have this additional force providing potentially a lot more money that is able to raise and spend as it pleases. Now that in and of itself isn’t necessarily unique. A traditional PAC could have always done that. Other interest groups could have always done that. So that is not necessarily new in the post-Citizens United environment. That is the threat of this additional unpredictability, if you view it that way. But the fact that Super PACs are there as a vehicle providing another outlet, especially for a group of wealthy individuals if they wanted to come together, that makes things less predictable, I think.

One thing that we don’t know as much about yet is where the division of resources is going to come down. For example, how involved are they going to be? Are Super PACs going to be in the presidential race versus the congressional races? We saw some activity in 2010, a fair amount of activity, but Super PACs didn’t become permissible until much of the way through the 2010 cycle. So we’re not quite sure yet how this is going to play out at the congressional level. So far, it appears that what some people call candidate-specific Super PACs – that is, Super PACs that form specifically to back an individual candidate – so far, that appears to be fairly common at the presidential level. There are a couple of anecdotal examples of that in congressional campaigns, but it’s not really clear yet how they’re going to affect congressional races, at least in a uniform sense.

QUESTION: So if there’s no disclosure – and if there’s no disclosure how would FEC or others find out whether there is any foreign money in the Super PACs?

MR. GARRETT: Well, there is disclosure. Super PACs would have to report their donors. So as I mentioned, it’s possible for any political committee – well, let me back up. It’s conceivable that any contribution that is coming to the entity that’s doing the spending, if it’s being routed through another source, then it’s possible the first – the original source of the funds isn’t disclosed. But the reporting requirements are uniform, essentially, for every kind of political committee. So if there were any evidence of foreign money – again, I’m not saying it can’t happen, but it’s one of those things that definitely does raise red flags, and I am not aware of it being a significant problem, although it’s something people are always on the lookout for.

QUESTION: Hi. Yashwant Raj, Hindustan Times. Can you speak a little bit about the public financing system? Are there limits? And why people – why candidates don’t opt for it, or they opt for it, and if a candidate can take money from this system and also have additional resources? Thank you.

MR. GARRETT: Sure. So public financing is only available for presidential candidates. There’s no congressional public financing. And I should say my comments, just to be clear, are focused on the federal system. There are additional procedures and regulations for state-level campaigns that might differ from what I’ve just described.

So there are two – there are really three phases to the presidential system. There’s the primary, the general, and the nominating conventions, and each of those elements is subject to a different availability of funding. And the nominating conventions actually receive first priority. And so thus far, the two major parties, Democratic and Republican, have both received grants for – to support their conventions. So that’s one element.

Now, the entire public financing system is financed through voluntary contributions on individual income tax returns. It’s $3 for individuals and $6 for married couples filing jointly. This doesn’t actually change someone’s tax burden. And technically, they’re not contributions; they’re just designations. So essentially, what the taxpayer is doing is saying that they want the IRS to direct part of their taxes to this special fund rather than to the general treasury. So that’s where the funding comes from.

In terms of candidate funding, in the primary, candidates are eligible for what are called matching funds, meaning that the federal government, through the Presidential Election Campaign Fund, will match individual contributions up to $250. And so, for example, if you raise 250, then you’d get a match of 250.

In the general, there’s just a grant that – a flat grant, and it – for the two major parties in 2008, it was about $84 million. For each major party nominee, it was about $84 million. And the reason that many candidates have chosen not to participate in the last few years is really, the system, starting in about 2000, started to see some cracks basically in terms of how attractive it was to candidates because candidates came to believe that they could raise more privately outside of the system than the benefit that they would get inside the system. And so if you look at a candidate like the Obama campaign, for example, they would have been limited to 84 million in the general election compared to the many times that they were able to raise privately.

In addition, if you accept public financing under the current model, then you’re limited in what you can spend. And so that is not the case if you’re a privately financed candidate. Historically, the goal of the presidential public financing system is to try to emphasize the role of small contributions in the primaries so that people can take advantage of that and get their matching funds, and to, at least theoretically, limit the amount of time that candidates are raising money because they’re not able to spend as much. What we see at the presidential level as well as in the states is that, essentially, when candidates believe they can do better outside of the system, they – or that they’ll need to, to be competitive, they tend to leave the system.

QUESTION: Thank you. Good afternoon. My name is Dagmar Benesova, World Business Press Online news agency from Slovakia. Well, I have such a question. As now, today, as we can only send the money – plays more important role from year to year, from elections to an election. So my question is: What do you think about – affect it now? It’s more the contest of money and bigger budgets than a contest of better ideas and better candidates in terms of values? If you can say something?

And then you already mentioned today that the cost of media has risen, and the role of money is more important. So maybe can you say that it’s because of the media, the more money are needed for election? Thank you.

MR. GARRETT: Okay. Well, let me take the second question first. There’s little doubt that most of the cost, most of the increased cost of campaigns, is associated with the need for what’s called paid media, particularly broadcast advertising. So certainly, it wouldn’t be so in every campaign. But for most competitive campaigns, media is going to account for a large account of the – a large amount of the budget.

Now, there are some observers who also argue that things like the rise of the political consulting industry, for example, contributes to the cost, and indeed some of the most sought-after political consultants are those who are called media consultants – that is, people who produce political ads and who buy the time for political advertising, et cetera. And over time, we’ve seen a great debate about what’s the relationship between consultants and political parties, and are they competing or not, et cetera. But regardless of where you stand on that, it’s pretty clear that the increase in campaigning is due largely, although not entirely, to media.

On your first question, I think that’s one that I’ll leave to interpretation, but I’ll say that it’s certainly, for those who are troubled by the amount of money in politics, often one of the motivations behind that concern is there is a concern that perhaps the best candidates aren’t getting out there. However, on the other side, a common response is that essentially, even if campaigns are expensive, no amount of money is going to make up for a flawed candidate, for example. If a candidate just isn’t out there making a connection with voters, then the candidate isn’t going to be able to buy his or her way into office. And that generally seems to be the case.

QUESTION: Andreas Geldner, Stuttgarter Zeitung, Germany. I have a question relating to the checks that are in place right now on Super PACs. What I’ve read, everybody says they’re very inefficient – the disclosure, for example, the donors comes much too late. And if you look at the fact that former consultants of a candidate are running the Super PACs, even the second thing, that they are not allowed to court any of the candidates seems to be quite theoretical. You think there’s any room or political will to change that, to make maybe the disclosure – the obligation for disclosure, for instance, more stringent? Or is there any party willing to tackle that?

MR. GARRETT: Well, so, to clarify, one of the – there are a couple of disclosure issues surrounding the Super PACs, a couple of areas of interest, that is. And I think you mentioned timing. What you’re probably referring to there is that we do know pretty much immediately when a Super PAC is spending money. They’re required to, if they’re – assuming they’re making independent expenditures, which they’re assumed to do, depending on the amount they’re spending in the time before the election, they would be required to file a report within 24 or 48 hours of the fact that they had spent funds. But they’re not required to – their donors are reported separately. And during a non-election year such as 2011, which we just came through, they can wait up to six months to disclose their donors. They could also choose to report monthly. And then during the election year, they have to choose between quarterly or monthly.

So something we saw in the early primary and caucus states, for example, was the fact that people knew from some of the disclosure reports, the expenditure reports, that Super PACs were spending money, for example, but we wouldn’t know who their donors were until after some of those early elections had occurred. So that’s something that has been certainly of interest in the media, and it’s certainly something that is a focus in some of the legislation in Congress.

The major piece of legislation that attempted to respond to Citizens United was called the DISCLOSE Act. Congress considered it in the immediate aftermath of the decision. The bill passed the House; the Senate chose not to pass it. A new version of that legislation has been introduced at least in the House, and it’s really not clear yet what’s going to happen with that or other efforts. It’s also possible that there could be some agency activity. Some people who believe there should be more regulation in this area, for example, are petitioning the FEC or the FCC, the Federal Communications Commission. There are proposals for things like greater notice to shareholders through SEC – Securities and Exchange Commission regulation, for example.

QUESTION: What about coordinating with the candidate? Is that no issue?

MR. GARRETT: Coordination is a very complicated topic, and it’s very controversial. Essentially, to avoid what would be called an in-kind contribution, meaning giving the campaign something of value rather than giving them a check, there’s this rather elaborate three-part test for establishing whether or not illegal or impermissible coordination has occurred. This is something that is a product of both regulation and statute, and the FEC’s interpretation of the coordination standard is often subject to litigation in the courts. So I think the short answer is it’s not really clear what’s going to happen with the coordination standard. It’s been in flux, essentially, for many years.

QUESTION: Jorgen Ullerup, Jyllandsposten, Denmark. You mentioned some statistics in the beginning, the price for a senator. Do you know how much the price was in 2008 for a delegate? Because there’s also journalism figures today that I think Romney’s paying 280,000 per delegate or something.

MR. GARRETT: Now when you say per delegate, do you mean convention delegates?

QUESTION: Yes, for the – yeah. And that’s Super PAC and his own money combined.

MR. GARRETT: Right. I haven’t seen – I’m not familiar with that piece, and I – off the top of my head, I can’t think of any analysis that breaks it down in terms of spending per delegate vote.

QUESTION: You don’t think – is it getting more expensive or is it (inaudible)?

MR. GARRETT: I would assume it is, but I don’t know. I’m sorry.

QUESTION: Sir, my name is Fengfeng Wang with China’s Xinhua News Agency. I have two questions. The first one: Given the outsized influence of persons like Sheldon Adelson and – in this election cycle, and the fact that the Democrats’ Super PACs are raising far less money than the Republicans, do you believe that the Democrats, if they win this election or after this – just after this election, will they bump up their game, like, say, in the Super PAC game, or are they going to try and limit it, say how a person can contribute to a Super PAC?

And secondly, as to the foreign money’s influence, certainly Super PACs have to disclose their donors, but we’ve learned that there’s – a nonprofit which can donate to a Super PAC does not need to disclose its donors. I believe it’s called 501(c); am I right? And so do you see any influx of foreign money that can come in through this avenue? Thanks.

MR. GARRETT: Sure. So on the first question, if I understood you correctly, essentially you’re asking about the divide between Democratic and Republican Super PACs. Thus far, we’ve certainly seen super-PAC activity on both sides. But the more active Super PACs, at least financially, tend to be on the Republican side. Now that might well be because we’ve got a crowded Republican presidential field, and perhaps if the situation were reversed on the Democratic side, we’d see more Democratic activity.

And of course, we don’t know what will happen now that the White House appears to have – well, at least the Obama campaign, I should say, appears to have at least tacitly embraced the Super PAC idea. I think it’s too early to say, to be honest. I realize that’s probably a rather unsatisfactory answer for you, but I think there’s – in general, it’s pretty early, really. I mean, here we are, it’s March; it’s a long way till November. And I think both with respect to campaign finance and lots of other things in American elections, I just don’t think we know with a lot of certainty how these things are going to shake out.

On the foreign money issue, I’m afraid I can’t offer a lot more comment than I could have to the previous question. The prohibition on foreign money in elections is clearly there. And it is possible that – yes, you’re correct that the disclosure requirements for 501(c) organizations are not the same as for a political committee, for example, but if an entity is spending in federal elections, then the prohibition is in place. But in terms of whether or not there are individual cases of other influence, that would be – that’s something I just can’t speculate on.

MODERATOR: Any other questions? Nobody else? New York, any questions from New York? No? All right. Thank you very much.

MR. GARRETT: Okay. Thank you.

# # #