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Campaign Finance Reform

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					       Campaign Finance Reform
I.     Purpose

II.    Fundamental Question

III.   Possible Reform Strategies Available to Legislators

IV.    Two Major Legislative Acts

       1.   FECA and Buckley v. Valeo
       2.   BCRA (McCain-Feingold) and McConnell v. FEC

V.     After BCRA… The Current Situation

VI.    Essential Questions #4 and #6
                    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
      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.”
          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
                                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
                              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)
            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?
            Buckley v. Valeo
Conclusion
 In this complicated case, the Court arrived at two
 important conclusions.

 1. 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.
              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.
  FECA before Buckley 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)
    FECA after Buckley 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)
                     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
            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.
                    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)
Table 9–2 Some Frequent Issue Advertisers in
       1999-2000 Presidential Primary
       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.
       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
Table 7–4 Effects of the 2002 Campaign
          Finance Reforms
Sen. John McCain (R-AZ)
Sen. Russ Feingold (D-WI)
               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
  1. 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?
  2. 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?
                  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."
    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
         •   527s = name refers to section of tax code
         •   Can do electioneering (image and name), but not express advocacy (“vote for” or “vote against”)
         •   No limits on contributions
         •   2004 Example: Swift Boat Veterans for Truth (Bob Perry)
         •   2006 Example: Majority Action; 2nd version; 3rd Version (George Soros)
         •   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.”
After BCRA… The Current Situation

Current concerns of reformers who want more changes

• RISING COSTS OF CAMPAIGNS
  – See chart
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.
After BCRA… The Current Situation

Current concerns of reformers who want more changes

• EASIER FOR INCUMBENTS TO RAISE MONEY FROM
  PACS
  – See chart
Figure 9–6 PAC Money Favors
         Incumbents.




   Source: FEC, “PAC Activity Increases for 2002 Elections,” March 27, 2003, at www.fec.gov.
After BCRA… The Current Situation

Current concerns of reformers who want more changes

• DECREASE IN COMPETITION
  – See chart
        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.
               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)
                Sources
Government by the People – 21st Edition

www.oyez.org

www.opensecrets.org

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