Pre-Campaign  |  Primary Candidates  |  Conventions  |  General Election

In 1996 the campaign finance system experienced a catastrophic failure.  Laws were bent, if not broken, and stories about White House coffees, Lincoln bedroom sleepovers, and Chinese money filled the headlines through much of 1997.  The Federal Election Commission proved ineffective at enforcing campaign finance laws that were themselves in need of an overhaul.  Large soft money contributions to the political parties drew  particular criticism. 

After years of work campaign finance reform advocates achieved a major victory on March 20, 2002 when the Senate passed the Bipartisan Campaign Reform Act of 2002 (BCRA, also known as McCain-Feingold) in a 60 to 40 vote.  President Bush quietly signed the measure into law (Public Law No. 107-155) on March 27, 2002; it took effect on November 6, 2002 although its constitutionality was challenged in the U.S. Supreme Court and legal wrangling continued well after the 2004 election.  There were concerns that cutting off the flow of soft money to the parties would harm those institutions, but the parties adapted well to the new environment.

One small but noteworthy change brought about by BCRA was to raise the $1,000 limit on individual contributions to $2,000 with indexing for inflation ($2,300 in the 2008 cycle).  The $1,000 limit had not been adjusted for inflation since the law was enacted in 1974 and was worth about one-third of the original level.

BCRA did not address shortcomings of the system of partial public funding.  The federal income tax check-off is plagued by a low level of citizen participation -- in recent years only about 11 percent of filers have done the check off compared to 27.5 percent on 1976 returns.  Another problem is that leading primary candidates, not wishing to be constrained by spending limits, are opting not to take primary matching funds (in 2004 Bush, Dean and Kerry opted out). 

In a Feb. 9, 2005 letter FEC Chairman Scott E. Thomas and Vice Chairman Michael E. Toner called on Congress to review the presidential public funding program. "If Congress does not act within the next two years, the system runs the risk of being totally irrelevant in the 2008 election and beyond," the Commissioners warned. 

The Campaign Finance Institute's Task Force on Financing Presidential Nominations'  issued a report "So the Voters May Choose...  Reviving the Presidential Matching Fund System" on April 12, 2005 offering a number of fixes.  In July 2006 Sen. Russ Feingold (D-WI) and Reps. Marty Meehan (D-MA) and Christopher Shays (R-CT) introduced legislation to address the problems.  However, their Presidential Funding Act of 2006 (S.3740/H.R.5905) did not advance in the 109th Congress.  They have reintroduced the bill, the Presidential Funding Act of 2007, but it would not take effect until 2009, that is for the 2012 campaign.  This legislation would make significant changes to the system of public funding, for example changing the primary match from 1:1 to 4:1, raising the spending limit for primary candidates from about $45 million to $150 million, and raising the income tax check-off from $3 to $10.  (press release).

Thus in 2008, as in 2004, leading candidates will forego matching funds during the primaries so as not to be limited on how much they can spend.  Some candidates are also considering turning down the federal grant in the general election.  In Feb. 2007 the Obama campaign started soliciting funds for use not only in the primaries but in the general election as well.  The campaign said, however, that if Obama did win the nomination it would adhere to public funding in the general election provided the Republican nominee did so as well.  (see FEC draft Advisory Opinion).  The prospect of campaigns declining to participate in general election public funding has caused concern among reform groups (press release).

There have been a couple of proposals to reduce the influence of big donors in the nominating process.  Unity08 is promoting a "Clean Money Pledge" which citizens pledge, "I will only vote for a presidential candidate who has raised more than half of his/her funds through small contributions of $250 or less."  Former Howard Dean campaign manager Joe Trippi proposed a "$100 Revolution" to give grassroots Democrats a greater say in the party's presidential nominating process.  On March 11, 2005 he created a stir speaking at the Politics Online conference at the George Washington University  when he threw out the idea of website that will ask donors for their email address and a pledge of $100 towards the 2008 Democratic presidential campaign.  As Trippi envisaged it, the pledges would accumulate to a formidable sum that would go to the first Democratic candidate who promised he or she will take only contributions of $100 or less.

A New Channel: the 527s
BCRA stemmed the flow of soft money to the parties, but the large soft money contributions quickly found a new channel in the so called "Section 527" political organizations.  527s, named after a section of the tax code, can engage in voter mobilization efforts, issue advocacy and other activity short of expressly advocating the election or defeat of a federal candidate.  There are no limits to how much they can raise. 

Ultimately, BCRA's effectiveness depends upon the Federal Election Commission's regulations, arrived at through an extensive rulemaking process.  The FEC again proved ineffective.  Legal challenges started immediately.  In a complaint filed on Oct. 8, 2002 and amended on Jan. 21, 2003, Reps. Christopher Shays and Martin Meehan charged that the FEC's regulations "thwart and undermine the language and congressional purposes of Titles I and II of BCRA." 

In Spring 2004 liberal groups such as America Coming Together (ACT) ("mobilizing voters to defeat George W. Bush"), The Media Fund ("media buying organization supporting a progressive message and defending Democrats from attack ads") and MoveOn.org Voter Fund, drawing backing from billionaire George Soros and others (example), engaged in a major campaign that paralleled that of the presumptive Democratic nominee Sen. John Kerry.  Republicans protested.  When on May 13, 2004 the FEC voted to delay a decision on regulating 527 committees, Republicans vowed to vigorously pursue their own 527 efforts.  In a joint statement, Bush-Cheney campaign chairman Marc Racicot and RNC chairman Ed Gillespie said the decision "sets the stage for a total meltdown of federal campaign finance regulation in 2004."  "The 2004 elections will now be a free-for-all," the two said in their statement.  "Conservative groups now have the go-ahead they were waiting for as the commission has now made clear that these '527' groups will not be affected by the federal campaign finance rules, at least in 2004."  Indeed in the the closing months of the campaign Republican aligned groups such as Progress for America Voter Fund and Swift Boat Veterans for Truth weighed in with significant advertising campaigns. 

And so the money flowed.  According to the Center for Public Integrity (>), 53 committees that focused "largely or exclusively on the presidential election" raised $246 million in the 2003-2004 cycle.  All told "527 committees raised and spent just over a half-billion dollars during the 2003-2004 election cycle." More on 527s

Post-2004 Action on 527s
BCRA continues to be interpreted, particularly on the question of 527 organizations.  Reps. Christopher Shays (R-CT) and Martin Meehan (D-MA) had challenged the adequacy of a number of regulations issued by the Federal Election Commission to implement the landmark law.  Bush-Cheney '04, Inc. also filed a similar lawsuit against the FEC on September 17, 2004.  In a ruling signed March 29, 2006 U.S. District Judge Emmet G. Sullivan found that "the FEC has failed to present a reasoned explanation for its decision that 527 organizations will be more effectively regulated through case-by-case adjudication rather than general rule."  He sent the matter back to the FEC "to explain its decision or institute a new rulemaking."  [FEC, overview]  On May 31, 2006 the FEC announced its intention "to prepare a more thorough explanation of the rulemaking decisions at issue" rather than go through a new rulemaking.  Two years after the election had concluded, on December 13, 2006, the FEC announced that it had reached settlements with three of 527s (two LCV 527s, MoveOn.org Voter Fund, and Swiftboat Veterans) to pay penalties totaling about
$630,000 for violating the Federal Election Campaign Act.  And, on August 29, 2007, the FEC announced that America Coming Together had agreed to pay a $775,000 civil penalty ("third largest civil penalty in an enforcement matter in the Commission’s thirty-three year history.") 

Note: The 109th Congress considered reforms to the rules governing Section 527 organizations, but nothing passed.  On April 5, 2006 the House passed the "527 Reform Act of 2005" sponsored by Reps. Christopher Shays (R-CT) and Martin Meehan (D-MA), by a vote of 218-209.  The bill would "require 527s to register as political committees with the Federal Elections Commission (FEC); set minimum allocation formulas for political committees which have both a federal and non-federal account; and limit contributions to non-federal (soft money) accounts of political committees to a $25,000 annual contribution per donor."  In the Senate, Sen. John McCain (R-AZ) introduced the "527 Reform Act of 2005," S.271, which would amend the Federal Election Campaign Act of 1971 to clarify when Section 527 groups must register as political committees.  The Committee on Rules and Administration held a hearing on S.271 on March 8, 2005.  However, changes made during the Committee markup on April 27 prompted Sen. Chuck Schumer (D-NY), a leading co-sponsor, to withdraw his support.

 

Pre-Campaign
During two years between the last presidential election and the mid-term elections, many potential presidential candidates use leadership PACs to fund their activities, including travel and supporting candidates and party committees, particularly in key states.  Additionally, potential candidates facing re-election either in the mid-term elections or in the next presidential year may also raise millions of dollars for those efforts.  This period can be useful for starting up a fundraising team and for building fundraising lists.

Primary Candidates
For primary candidates there is a voluntary system of partial public financing. 

After a candidate qualifies by meeting the $100,000 threshold--raising $5000 in 20 states in contributions of $250 or less--his or her campaign becomes eligible to receive matching funds.  Contributions from individuals of up to $250 are matched dollar for dollar with payments from the Presidential Election Campaign Fund.  Candidates began receiving payments in January 2004.  They must agree to comply with spending limits, based on the 1974 figure of $10 million, adjusted for inflation (in 2004 the limit was $37.31 million; when costs associated with fundraising were included it was actually higher).

These limits can pose difficulties; in 1996 a heated primary battle left the Dole campaign with little money for about four months leading up to the convention.  Likewise in 2000 Gore had some lean months prior to the convention.  DNC Chairman Terry McAuliffe vowed to avoid such a situation in 2004 and he emphasized that by the time the Democratic nominee was selected, the party would be ready with a check for the full amount of coordinated expenditures authorized under law, which is two cents times the voting age population of the United States.  (11CFR109) As it happened Sen. Kerry raised more than $200 million between Super Tuesday and the Convention.

A candidate who chooses not to participate in the matching funds program can spend as much as he or she wants, but contributions from individuals still may not exceed $2,300 (BCRA's $2,000 indexed for inflation).  There is no limit to how much a candidate can spend of his or her own money.  In the 2000 Republican primary campaign then Gov. George W. Bush declined matching funds and brought in more than $90 million in individual contributions, a record.  In 2004 President Bush again declined matching funds and  there were suggestions that he could raise upwards of $200 million although he faced no credible Republican challenger.  Faced with this prospect, two of the Democratic candidates, former Gov. Howard Dean (on Nov. 8, 2003) and Sen. John Kerry (on Nov. 14, 2003), opted out of the public financing system as well. 

Through Jan. 31, 2004 > the money going to the Democratic and Republican campaigns was roughly even.  The campaign committees of the ten major Democratic candidates raised about $141.8 million in individual contributions compared to $142.2 million for Bush-Cheney '04.  (That did not include contributions to compliance committees or the $6.7 million in individual contributions to fringe candidate Lyndon LaRouche).  Early money is vital to a candidate's viability; 2004 also witnessed the phenomenon of late money.  A Campaign Finance Institute analysis found that a majority of “pre-nomination” money "was raised and spent to affect the general election." 

All told during the 2004 primaries, the Bush campaign raised $258.8 million in individual contributions; 221 Rangers raised at least $200,000 and 327 Pioneers raised at least $100,000.  Ten Democrats raised $351.0 million in individual contributions, led by Kerry with $215.4 million in individual contributions.  Six Democrats and Ralph Nader received just over $28 million in matching fund payments.  Taking into account other receipts, transfers and money raised from committees, the total receipts in the pre-nomination period for the campaign committees alone added up to $673.9 million; expenditures totaled $661.1 million.
 

Conventions (11CFR9008)
The major parties receive public funds to put on their national nominating conventions, based on the 1974 figure of $4 million, adjusted for inflation.  On June 30, 2003 the FEC certified the Democratic and Republican parties were each entitled to receive $14,592,000 in public funds to put on their 2004 national conventions, and sent letters to the Secretary of the Treasury requesting the payments be made; inflation adjustments brought the figure up to $14.9 million.  (Third parties whose presidential nominees received at least five percent of the vote in the previous election also can receive funds toward their conventions; none met this criterion for 2004).  Additionally, non-profit host committees are formed to defray expenses connected with hosting conventions, and these can accept direct and in-kind contributions from local businesses, unions and individuals.  According to the FEC, the Boston host committee raised $56.8 million and the New York host committee raised $85.7 million.  Fourteen companies and individuals donated $1 million or more to the Boston effort and 20 companies and individuals donated $1 million or more to the New York effort.  The Campaign Finance Institute has been sharply critical of the FEC's approach to the host committees.  In a July 7, 2004 press release, Michael Malbin, executive director of CFI stated, “The FEC rules have created a $100 million loophole for unlimited soft money contributions to the political parties.” 

General Election
The Democratic and Republican nominees receive grants to cover all expenses in the general election campaign, based on the 1974 figure of $20 million, adjusted for inflation.  In 2004, immediately after their respective conventions, the Bush and Kerry campaigns each received grants of $74.62 million to cover general election campaign expenses.  Third parties whose presidential nominees received at least five percent of the vote in the last election receive funds according to the share of the popular vote obtained.

In addition, as mentioned above, the party committees may spend some money on behalf of their nominees, in the amount of 2 cents times the voting age population of the United States; these coordinated expenditures amounted to $16.25 million for each party in 2004. 
 

Total Spending: More than $1 Billion 
Adding up the primary candidate, convention, and general election receipts produces a total, according to the FEC, of $1,016.5 billion.  This does not include independent expenditures, 527 spending, and spending by membership organizations communicating with their members.  The Center for Responsive Politics put total spending on the 2004 presidential election at $1.2 billion while noting that "this figure includes a very conservative estimate of spending by advocacy groups."(>)
 
 

Resources
Campaign Finance Institute (Task Force on Financing Presidential Nominations). "Participation, Competition, Engagement: Reviving And Improving Public Funding For Presidential Nomination Politics."  Report issued on September 22, 2003; updated report issued on April 12, 2005.

Campaign Finance Institute (Steve Weissman and Ruth Hassan).  “The $100 Million Exemption: Soft Money and the 2004 National Party Conventions.”  Report issued on July 7, 2004.

Institute for Politics, Democracy & the Internet.  March 13, 2006.  "Small Donors and Online Giving: A Study of Donors to the 2004 Presidential Campaigns."

Texans for Public Justice.  October 1, 2004.  "Payola Pioneering: Exposing the Bush Pioneer/Ranger Network."

Democracy North Carolina.  August 2003.  "The Color of Presidential Money: North Carolina Case Study."

Center for Public Integrity's Buying of the President 2004
The Center for Public Integrity, "a nonprofit, nonpartisan, non-advocacy, independent journalism organization" published its book looking at the candidates and their career patrons in January 2004, following up on books in 2000 and 1996. This is the companion web site.

Public Citizen's WhiteHouseforSale.org
A project of Public Citizen, the nonprofit public interest organization. 

Fundrace 2004
A project of Eyebeam, a 501(c)3 art and technology non-profit. 

Michael J. Malbin, ed.  March 2006.  The Election After Reform: Money, Politics, and the Bipartisan Campaign Reform Act.  Lanham, MD: Rowman & Littlefield Publishers, Inc. 

General
Federal Election Commission--Main
FEC-All Presidential Candidates
CFR Title 11--Federal Elections-(01/04)
CFR Title 26--Internal Revenue -(05/03)