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Making $100 Worth $400 with a Three-For-One Match

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Making $100 Worth $400 with a Three-For-One Match CHAPTER 3I Broadening the Base: Making $100 Worth $400 with a Three-for-One Match The heart of the presidential public finance system – as already said – is the tradeoff T between public funding and expenditure limits. Current rules Public matching funds were supposed to help foster competition and participation, but to understand how, Contribution limits and judge them fairly against their intended purposes, ◆ The Federal Election Campaign Act Amendments of 1974 one must see the law in historical context. limited individual contributions to a federal candidate to $1,000 per election. FECA also limited political action The 1974 campaign finance law was a direct reaction to committee (PAC) contributions to $5,000 to a candidate President Nixon’s reelection campaign. The most per election. Contribution limits were not indexed for important purposes of its main fundraising provisions inflation. If they had been, $1,000 would have been worth for presidential primaries were as follows: about $3,650 in 2002. ◆ Reduce the importance of the largest donors: FECA’s ◆ The Bipartisan Campaign Reform Act of 2002 raised the sponsors were concerned that unlimited contributions individual contribution limit to $2,000, and indexed it for were potentially corrupting – both because they could inflation, but left the PAC limits unchanged at $5,000, with give some contributors an undue level of influence over no indexing. some office holders, and because the ability to ask for Matching fund system unlimited contributions could put too much power in ◆ the hands of public officials to extract wealth from private Candidates who qualify for matching funds, and choose to participate in the system, receive a 1:1 match for the citizens with business before the government. In 1972, first $250 in contributions from an individual. The $250 for example, the Committee to Reelect the President matching fund amount has not been changed or indexed (CRP) raised about $62 million for President Nixon’s for inflation since 1974. campaign. About one-third of that, or $21.3 million, came from only 154 donors, who gave an average of ◆ The current cap on public funding is 50% of the base more than $138,000 each (Alexander 1976:279). FECA’s spending limit, or $18.3 million in 2004. To receive this amount, the candidate would have to raise half of the full sponsors thought the public record developed in the base spending limit, or $18.3 million, in amounts of $250 Watergate hearings about fundraising in 1972 gave ample or less. evidence of both kinds of potential corruption. They expected that the new law’s $1,000 contribution limits ◆ The first matching funds are made available to candidates would cut down the influence of the largest contributions on January 1 of the election year. from federal election financing. ◆ Provide a public subsidy to replace some private funds: Because it was doing away with a significant source of campaign money, the 1974 law tried to replace some of it with public money by providing matching funds for the first $250 given by every contributor to a presidential candidate participating in the system. ◆ Promote competition: Public matching funds were expected to help under-financed but potentially viable candidates, without giving too much to marginal ones; ◆ Encourage small donors: By matching the first $250 on a one-for-one basis, the FECA was trying to give candidates an incentive to solicit small to moderate sized contributions. 27 Assessing the 1974 System For some time, the system seemed to work more or less as hoped, supporting competition, increasing the role of small donors, decreasing the role of the largest ones, and replacing some of the lost private money with public funds. Matching funds have been important as a source of revenue for candidates. On average, between one-quarter and one-third of the money raised by participating candidates comes from public monies. Candidates who emphasize the solicitation of small contributions usually receive 35-40 percent of their resources from public funding. Those who emphasize the solicitation of larger gifts of $500 or more, such as incumbent presidents and well-established contenders, usually receive 25-30 percent of their total revenues from matching funds1. Competition Matching funds have helped to provide lesser-known contenders with the revenues needed to mount a viable campaign, especially in the critical, early primary states. For these individuals, such as Jimmy Carter in 1976, Gary Hart in 1984, Bill Clinton and Paul Tsongas in 1992, and John McCain in 2000, public subsidies proved to be a sorely needed source of resources at crucial points in the delegate Ronald Reagan relied on small contributions selection process. Public funding has thus played a role in enhancing competition for his presidential campaigns. Because of in presidential primary campaigns. this, he became the only candidate ever to “max out” in his public funding. The availability of public money has been of particular benefit to ideological candidates. Liberal contenders such as Democrats Jesse Jackson (1984 and 1988) and Jerry Brown (1992) raised a substantial portion of their campaign revenues from matching funds. For example, Jackson solicited a combined $17.4 million from donors in his two bids for the presidency and earned $10.7 million in matching funds. Brown accepted only small contributions of $100 or less and matched his $5.2 million in individual gifts with $4.2 million in public money. Similarly, conservative candidates such as Pat Robertson in 1988 and Patrick Buchanan in 1992 capitalized on their small donor bases to generate significant sums of public money. Robertson raised $20.6 million in 1988 and accrued $9.7 million in matching funds. Buchanan solicited $7.2 million in 1992, which generated $5 million in match. Yet neither of these candidates reached the high water mark for reliance on public funds, which was established by Ronald Reagan in his 1984 reelection campaign. In that year Reagan received about 60 percent of his funding from small donors and earned $9.7 million in matching funds, which was the maximum amount permitted under the limits in effect at the time. 1 This paragraph and the next two are from a background paper written for the Task Force by Anthony Corrado. 28 Participation From this record, we see that the matching fund system has helped competition. But the record is more mixed if part of the purpose was also to broaden participation by small donors. Of course, one might argue that the public fund is itself a form of participation, since the money comes from the broadly based income tax checkoff. But checking off a box on is not as fully engaged a political action as is writing a $50 check to a candidate. If we look at the donor rolls, there is both good news and bad news about participation. The good news is that more than 70 percent of the people who gave contributions to presidential candidates in 2000 gave in amounts of less than $100. The bad news is that there were fewer than 600,000 such people, combined, for all candidates, and therefore the bulk of the money came from people who gave money in larger amounts. (See Appendix Table A.3.1.) The total number of donors in 2000 (some of whom gave to more than one candidate) was 774,000, which is less than four-tenths of one percent of the voting age population. For a comparative perspective, George McGovern and Richard Nixon each had about 600,000 general election contributors in 1972, according to political scientist Herbert E. Alexander. Nixon relied heavily on major contributors. McGovern relied on small contributions, much of it raised by direct mail. We do not know how many prenomination contributors Nixon had since much of his money was raised before disclosure was required on April 7, 1972 and then used in the general election. McGovern reportedly had about 200,000 contributors during the primaries. (See Alexander 1976:279; 293-94.) By comparison, subsequent nominees seem to have relied less on small donors. The publicly funded candidate with the largest number of contributors in 1996 or 2000 was Bob Dole, with 126,831 donors of $100 or less, and 164,983 donors in all. Al Gore and Bill Clinton were a close second and third. (Of course, any of these would have raised more if they still had room to do so within a higher spending limit.) George W. Bush, who did not accept public funds, had about 90,000 small contributors and 191,000 donors in total. Thus, the real story is not that small donors don’t give, or that the candidates do not ask for their money. The candidates do ask – on the telephone, over the Internet, and constantly by mail. However, as the nomination process has evolved, the small donors have not been the top candidates’ main concern. Consider the following table and figure (Table 3.1 and Figure 3.1), which show how winning candidates, over the years, increasingly have relied on large donations for their funding. 29 In the first three elections under the law, only one of the six winning major party nominees (Jimmy Carter as an incumbent) received more than 31 percent of his individual contributions from donors who could write a $750 check. In the four elections with eight winning candidates since then, only two received as little as 42 per cent! Al Gore was at the two-thirds mark. George W. Bush and his father each raised more than three-quarters of their private money in amounts of $750 or more. Table 3.1 Winning Candidates’ Small and Large Donations as a Percentage of Individual Contributions, 1976-2000 Less than $200 $750 or more 2000 Figure 3.1 Bush (R) 11 % 75 % Winning Candidates Small and Gore (D) 16 66 Large.
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