United States House of Representatives Elections - Features of The Election System - Campaign Finance

Campaign Finance

The funding of electoral campaigns has always been a controversial issue in American politics. Infringement of free speech (First Amendment) is an argument against restrictions on campaign contributions, while allegations of corruption arising from unlimited contributions and the need for political equality are arguments for the other side. Private funds are a major source of finance, from individuals and organizations. The first attempt to regulate campaign finance by legislation was in 1867, but major legislation, with the intention to widely enforce, on campaign finance was not introduced until the 1970s.

Money contributed to campaigns can be classified into "hard money" and "soft money". Hard money is money contributed directly to a campaign, by an individual or organization. Soft money is money from an individual or organization not contributed to a campaign, but spent in candidate specific advertising or other efforts that benefits that candidate by groups supporting the candidate, but legally not coordinated by the official campaign.

The Federal Election Campaign Act of 1971 required candidates to disclose sources of campaign contributions and campaign expenditure. It was amended in 1974 to legally limit campaign contributions. It banned direct contributing to campaigns by corporations and trade unions and limited individual donations to $1,000 per campaign. It introduced public funding for Presidential primaries and elections. The Act also placed limits of $5,000 per campaign on PACs (political action committees). The limits on individual contributions and prohibition of direct corporate or labor union campaigns led to a huge increase in the number of PACs. Today many labor unions and corporations have their own PACs, and over 4,000 in total exist. The 1974 amendment also specified a Federal Election Commission, created in 1975 to administer and enforce campaign finance law. Various other provisions were also included, such as a ban on contributions or expenditures by foreign nationals (incorporated from the Foreign Agents Registration Act (FARA) (1966).

The case of Buckley v. Valeo (1976) challenged the Act. Most provisions were upheld, but the court found that the mandatory spending limit imposed was unconstitutional, as was the limit placed on campaign spending from the candidate's personal fortune and the provision that limited independent expenditures by individuals and organizations supporting but not officially linked to a campaign. The effect of the first decision was to allow candidates such as Ross Perot and Steve Forbes to spend enormous amounts of their own money in their own campaigns. The effect of the second decision was to allow the culture of "soft money" to develop.

A 1979 amendment to the Federal Election Campaign Act allowed political parties to spend without limit on get-out-the-vote and voter registration activities conducted primarily for a presidential candidate. Later, they were permitted by FECA to use "soft money", unregulated, unlimited contributions to fund this effort. Increasingly, the money began to be spent on issue advertising, candidate specific advertising that was being funded mostly by soft money.

The Bipartisan Campaign Reform Act of 2002 banned local and national parties from spending "soft money" and banned national party committees from accepting or spending soft money. It increased the limit of contributions by individuals from $1,000 to $2,000. It banned corporations or labor unions from funding issue advertising directly, and banned the use of corporate or labor money for advertisements that mention a federal candidate within 60 days of a general election or 30 days of a primary. The constitutionality of the bill was challenged and in December 2003, the Supreme Court upheld most provisions of the legislation. (See McConnell v. FEC.)

A large number of "527 groups" were active for the first time in the 2004 election. These groups receive donations from individuals and groups and then spend the money on issue advocacy, such as the anti-Kerry ads by Swift Boat Veterans For Truth. This is a new form of soft money, and not surprisingly it is controversial. Many 527 groups have close links with the Democratic or Republican Parties, even though legally they cannot coordinate their activities with them. John McCain, one of the Senators behind the Bipartisan Campaign Reform Act, and President Bush have both declared a desire to ban 527s.

Changing campaign finance laws is a highly controversial issue. Reformers wish to see laws changed in order to improve electoral competition and political equality. Opponents to reform wish to see the system stay as it is or with even fewer restrictions on the freedom to spend and contribute money. The Supreme Court has made it increasingly difficult for those who wish to regulate election financing, but options like partial public funding of campaigns are still possible and offer the potential to address reformers' concerns with minimal restrictions on the freedom to contribute.