Introduction

No one seems to have a practical and popular remedy for America’s arcane campaign finance laws.

The only sincere proposals for reform are authored by nonpartisan scholars. However, when reformers meddle with campaign laws, the only effect they seem to have is to replace old problems with new ones.

The rest of the actors in America’s campaign finance quagmire -- Congress, the candidates, special interests, the parties, the Federal Election Commission, the voters -- are either resistant to change because their power is at stake or are advocates of change but do not have enough power to warrant it.

Congressional proposals for reform are intentionally engineered for legislative gridlock. This allows members to remain in good standing with their constituents while enjoying the campaign advantages that incumbency inherently provides. The special interests and political parties compete to control the money-hungry candidates. The intended watchdog of the law, the FEC, is tied to Congressional strings and, although it serves some useful purposes, is realistically just a symbolic formality. Candidates don’t say anything because nobody would trust them anyway. And the voters? They are the (not so innocent) victims of this mayhem.

The Importance of Money in Campaigns

If power is the end of a politician’s agenda, then money is his means to it. Whereas in business money is an end in itself (i.e. "It takes money to make money"), in politics the motto is "it takes money to make power." Because most candidates do not possess enough money to finance their own campaigns, they must raise it elsewhere. Without this money-raising ability, candidates can not campaign. Says Robert Farmer on Paul Tsongas's decision to quit the 1992 presidential race: "People don't lose campaigns. They run out of money and can't get their planes in the air. That's the reality" (Brown, Powell, Wilcox; 1). A run-down of other monetary realities will define the context in which reformers devise their proposals.

The first reality is that every election cycle is costlier than its predecessor. Congressional campaign spending has gone from under $80 million in 1972 to over $600 million in 1994 (Faucheux, 1995). Incumbents often complain that the money-raising imperative distracts them from governing responsibly. In testifying to this money craze, Lee Daniels (R-Ill) said, "it is insane for both parties to pay $400,000 to $500,000 for a job that pays $39,000 a year."

Reality number two: money can make or break a tie in elections. In the 1994 Congressional elections, there were eight instances where incumbents won by a narrow margin (within one to three percent) but had dramatically overspent their challengers (Faucheux, 1995). Although possible, it would be hard to argue that coincidence or pure luck were the driving forces in each of these eight cases.

Finally, incumbents possess a clear advantage in money-raising capabilities. For example, all things being equal, Senate incumbents outspent their challengers by a margin of three-to-one in 1994 (Faucheux, 1995). Moreover, the only two Senate incumbents who failed to win reelection in 1994 were not only outspent but were high on the opposition's hit list (Fauchuex, 1995). More specifically, incumbents have an advantage in garnering PAC contributions. In 1992, for example, incumbents received 89 percent of PAC contributions (Hillyer, 1993). To be sure, PAC contributions constitute 46 percent of a House incumbent’s campaign and only 15 percent of a challenger’s (Herrnson, 1995). Because more PAC money goes to incumbents than to challengers, more PACs in the system have the effect of increasing an incumbent's already favorable chance of winning. As long as special interests continue to form new PACs, the money-raising disparity between incumbents and challengers will continue to grow.

The result of these realities is that campaign finance reformers have devised various schemes to fuel more clean money into the system and to give challengers a better chance at unseating incumbents (Jackson, 325). However, before reformers even consider how to reform the system, they must determine what to reform. This approach is indispensable to devising sensible campaign finance reforms. An examination of the pros and cons of current campaign laws will provide insights into what needs to be done in order to accomplish these goals.

II. The Federal Election Campaign Act

The Federal Election Campaign Act was passed in the wake of the Watergate scandal and has been amended three times -- 1974, 1976, and 1979. The basic framework for the current campaign finance system can be seen through several provisions: disclosure of information on contributions; the ascent of PAC's as a result of the "soft money" loophole; contribution limitations; the constitutional intricacies of limiting campaign expenditures; and the public funding system. While some of these provisions have affected campaigns in profound ways, others have caused unintended consequences.

Disclosure of Information

Full disclosure of information is perhaps the best outcome of the FECA. Candidates are responsible for reporting contributions of at least $200 to the Federal Election Commission (Pika/Mosley/Watson, 23). This provision was designed to reduce corruption which would thereby restore the public’s faith in the system.

Contribution Limits

The 1974 amendment addressed the issue of contribution limits. Under the amendment’s prescribed conditions, an individual may contribute $1,000 to any particular candidate and $5,000 to any particular political action committee, but the sum of these contributions may not exceed $25,000 a year (Pika/Mosley/Watson, 23). It was hoped that these limits would reduce the amount of contributors’ influence.

Voluntary Expenditure Limits and the Public Funding System

The 1976 Supreme Court case (Buckley v. Valeo) and subsequent amendment set the standard for expenditure limits. In this decision, the Supreme Court ruled that expenditure limits are unconstitutional, on First Amendment grounds, unless a candidate voluntarily chooses to abide by these limits. Taking advantage of this Constitutional loophole, reformers devised a system that provides rewards for candidates who agree to abide by expenditure limits. At the heart of these rewards is the public funding system.

To receive public funding during the primary season, a candidate must first establish his eligibility and then agree to abide by state and federal spending limits. A candidate is eligible for public funding if he can raise $5,000 in sums of $250 or less in at least 20 different states (Rose, 152). However, only when a candidate agrees to abide by state (amount set by each state) and federal (no more than $10 million in 1974 dollars) spending limits, will the US Treasury match all individual contributions to candidates of $250 or less up to a maximum of $5 million in 1974 dollars (Rose, 152).

The eligibility requirement serves two purposes: it makes candidates acquire money from a broad range of contributors; and it proves that a candidacy is sincere and thus worthy of federal tax monies. At the same time, the participation of legitimate minor party candidates in the public funding system (e.g. Sonia Johson, Lenora Fulani, Lyndon LaRouche, and John Hagelin) suggests that the eligibility requirements are strict enough to keep out the drakes but lenient enough to foster serious third party candidate participation.

Candidates must also abide by eligibility and expenditure requirements in the general election. However, because more money is involved in this stage of the process, the requirements are stricter. To be eligible for full public funding ($20 million in 1974 dollars), a candidate’s party must have received at lest 25 percent of the popular vote in the last election (Rose, 153). Once eligible, a candidate must agree not to spend any more than the amount of public money he receives and no more than two cents per voter in 1974 pennies (Rose, 153).

Ascent of PACs

The most significant unintended consequence of the FECA came in 1979. In an attempt to strengthen the role of political parties, reformers "authorized unlimited PAC and individual donations to party activities (e.g. get out the vote) unrelated to specific candidate races" (Bennett, 52). This created a loophole, known as "soft money," that augmented the role of PAC’s in the presidential election system. Although this reform strengthened the parties, it also reinstated elitist big money influence in presidential elections. The 1979 "reform" has served as a forewarning to reformers: proceed with caution when designing reforms because solutions often create new problems.

III. Assessing Reform Proposals and Potentialities

The Futility of Congressional Reform Efforts

The dilemma in passing campaign finance reform begins with Congress's accountability to two distinct constituencies. Citizens, on the one hand, directly put politicians in office by voting for them. They want campaign finance reform. And, because political experts and the media expose PACs as a source of corruption, citizens specifically want PAC influence reduced. The longer it takes to pass such reform, the more cynical citizens become about politics. Political Action Committees, on the other hand, indirectly put politicians in office by financing their campaigns. They do not want campaign finance reform because they would lose their ability to control politicians.

Congress's answer: work hard at creating the illusion of change. By designing legislation that is too controversial to pass into law, incumbents get to keep their monetary edge in campaigns, PACs get to keep their control of politicians, and the public, well, is gullible enough to believe their representatives did everything they could to change the system. There are plenty examples of such legislation. In the early 1990s, HR 3 and S3 were designed with full knowledge that they would not pass both halves of Congress. In the same light, Greg Kubiak traces his personal experiences of campaign finance reform through congressional wheeling-and-dealing, a dramatic 57 hour senate session, a record-breaking cloture vote, and a presidential veto (Kubiak, 1994).

Considering the fact that all three players have the ability to control each other in some way (politicians have laws and policy, PACs have money, and citizens have votes), the current political climate is relatively stable. Should politicians reduce PAC power, however, chaos would ensue.

The possibility for such change -- and chaos -- is growing. This possibility is due, in part, to politicians' inability to perform their jobs. Bob Dole, for example, sums up this frustration: "When political action committees give money, they expect something in return other than good government. This makes it very difficult to legislate. We may reach a point where everybody is buying something with PAC money. We cannot get anything done" (Bennett, 55).

Change may also be near because politicians are beginning to work together again. For the last ten years, Democrats have supported spending limits, while Republicans have opposed them in order to uphold their superior fund-raising prowess. Moreover, the House defends PACs (House incumbents receive more PAC money than Senate incumbents) while the Senate would like to get rid of them (Herrnson, 256). Scholars have stressed this disorganization in their reform proposals. Herbert Alexander, one of the foremost campaign finance scholars, has stressed the need for "a bipartisan bill reflecting compromise among Democrats and Republicans, Senate and House, Congress and White House in order for campaign reform to succeed" (Alexander, 280).

The political climate in Washington has recently taken a step in this direction. In 1995 alone, two bipartisan proposals were introduced in Congress: The McCain (R-AZ) - Feingold (D-WI) proposal and the Bipartisan Clean Congress Act. Newt Gingrich is the next obstacle for the 104th Congress. Instead of endorsing reform proposals, Gingrich wants to create a panel to "look at lobbying, at campaigns, at parties, at the behavior of incumbents, at the nature of Washington" (Schwinn, 1995). Thus, even though Congress has made progress by leaps and bounds, Gingrich's stalling tactics may keep reform from materializing before the end of the 104th's term.

The FEC

Administering the disclosure of campaign contributions became the FEC’s primary function after the Supreme Court repealed the its law-affecting power in 1976. A number of constraints, however, have severely limited the FEC's effectiveness as the campaign finance watchdog: The FEC is understaffed and therefore incapable of conducting proper investigations (Jackson, 7); its Commissioners are often appointed by Congressional cronies and are therefore vulnerable to partisan political pressures (Jackson, 1990, Center for Responsive Politics, 1993); and its budget is often insufficient because Congress uses the Commission as a hacking block (Jackson, 1990; Center for Responsive Politics, 1993).

Because of the FEC's limited enforcement capability, politicians and contributors alike have realized that they can be corrupt without fear of retribution. Consider the following example: Mark Weinburg, a commodity trader, donated $45,000 to Senator Alan Cranston's 1984 presidential campaign (Jackson, 3). Although this was a blatant infringement of contribution limit laws, Weinburg casually admitted that "I’ll pay the FEC eventually, but I’m in no hurry. The FEC is a bunch of idiots in my opinion" (Jackson, 7). By February of 1990, six years later, Weinburg still had not paid the FEC.

As a result of these trends, it is not surprising that many reformers propose a strengthened or replaced Commission as a means of restoring the effectiveness of campaign laws (Jackson, 1990; Herrnson, 1995; Jackson, 1990; Center for Responsive Politics, 1993). Unfortunately, unless the Congressional climate continues to change, the chances of reforming the FEC are remote.

Expenditures: Floors or Ceilings

Floors

Floors without ceilings is an approach that is favored in several Western European countries. The idea behind this scheme is that a minimum standard of fairness is set for all candidates, thereby allowing all who wish to run for office a chance at exposing their personas and platforms. A floor can either be set on free broadcast time or partial public funding can be given at the beginning of a campaign. Before such a policy is adopted, however, a number of considerations should be addressed.

First, there are no prerequisites or eligibility requirements for floors. The current public funding system already provides ample opportunity for remote candidates to participate. Indeed, there are almost a dozen candidates in the 1996 Republican primary and all but two are benefiting from the public funding system. Second, although floors claim that candidates have the ability to reject undesirable private contributions, candidates under the public funding program have better opportunities for rejection. The logic behind this claim is simple: you get more money under general election public funding than you do under the floor program (that would provide only partial public funding during the primaries). Therefore, you have less money to raise during your campaign. Finally, the proponents of floors boast that the absence of spending limits would avoid First Amendment issues. So what!? The public funding system already thrives by working around constitutional law. Moreover, ceilings are desirable because, as Steve Forbes' candidacy testifies, the more you spend, the better you do. If your spending level is capped, then there is only so much negative advertising and name building schemes you can launch.

Herbert Alexander points out that "floors without ceilings were actually experienced in the presidential general elections of 1992, when public funds provided the floors but the ceilings were not effective because of substantial soft money spending" (Alexander, 282). Again, so what? Alexander would be the first to admit that unmitigated PAC power (i.e. soft money) is harmful to the integrity (what little it has) of the system. Moreover, proponents of floors say nothing about what they would do about providing public funding for the primaries. As suggested above, this move would arouse concern.

State Spending Limits

Candidates are always hard-pressed to meet state expenditure limits. They have devised a number of ways to extend their limit. For example, "candidates headed for New Hampshire routinely fly into Logan Airport so that the air fare is allocated to the Massachusetts spending cap" (Rezendes, 1). Candidates also locate telephone banks, rental cars, housing facilities, TV ads, and mail in different states so as to increase their spending limit in that state.

In 1991, the FEC passed several regulations in an attempt to accommodate for lack of funds. They removed "fees for placing television, radio, or print advertisements. They removed staff salaries, travel expenses and consulting fees" (Alexander, 29). But, because the New Hampshire limit was set at a meager $552,400 in 1992, these cuts were not enough. New Hampshire and Iowa are the first elections of the primaries and often set the stage for how a candidate will do in the rest of the race. As a result, candidates put a lot of money, time, and energy into these states. Reformers should amend the state spending limits provision of the FECA in such a way that New Hampshire and Iowa’s special circumstances are accommodated for.

Federal Spending Limits and Public Funding

Those who condemn public funding denounce it as extortion, blackmail, extensive spending, as an entitlement program.

Public funding is seen as excessive because it is using much needed tax dollars in a system that has unlimited resources of contributions (i.e. PACs). Opponents of public funding argue that it is unjust to make citizens finance public funding if they oppose it. First of all, public funding does not work this way -- the $3 checkoff is voluntary. Secondly, public funding is justified in that it recognizes that citizens have the right to choose the programs they wish to support. This is a luxury that other federal programs do not enjoy. When put under the heat of Constitutional restraints, public funding bodes better than other policies.

Proponents may be helping the public funding cause when they declare that it is just an entitlement program for politicians. After all, there is always at least one type of candidate that is discriminated against (i.e. incumbents have an advantage over challengers). Although this would be highly unpopular in Washington, perhaps a remedy to this discrimination would be to favor the discriminated group in some sort of affirmative action fashion. If a challenger was given, on a need to have basis, more public funds or was allowed to accept more contributions, then, perhaps he could begin to make up for the discrepancy in PAC money and his lack of name recognition. In light of the Constitution, this excess money can be received and used only under voluntary stipulations.

There are limits to public funding that reformers should pay close attention to. In one proposal, for example, "candidates who don't accept voluntarily spending limits are punished by either losing their public funding privilege or by being forced to pay taxes on their contributions" (Walker, 1993/4). This is extortion and blackmail and is an infringement on the freedom of speech. A lawyer would be able to argue in court that public funding is not "voluntary" in this situation because if a candidate did not accept it he would be doomed to defeat. Reformers should glean a lesson from this: any law that would not pass constitutional barriers is no good.

Public funding does exploit a loophole in the US Constitution and is, therefore, not a perfect policy. But it does provide a paradigm of utilitarian decision-making. That is, of the two choices to be made -- you can either find loopholes in campaign finance laws (to favor the candidates and campaign marketing specialists) or you can find loopholes in the Constitution (to favor the public) -- one of them will bring the most good to the most people. Although both of these choices contain an element of evil, Congressmen are forced to choose one of them. Pick the lesser of two evils: the latter evil would benefit the entire electorate while the former evil would benefit the elite campaign community.

Public funding reform is not needed because it serves its purpose. Its major weakness is that support for the $3 checkoff could be higher. However, increasing the checkoff is not the answer. The best remedy for public funding would be a stronger FEC Better enforcement of laws leads to better public faith in the system which, in turn, increases participation.

Loopholes: PACs and Soft Money

PAC "soft money" can be contributed to a campaign in unlimited amounts (i.e. it is the main loophole to the FECA and is not subject to disclosure) through numerous venues (e.g. soft money, precandidacy PACs, leadership PACs and independent PACs). As the supply of soft money expands, politicians spend more time targeting and catering to PACs.

Some PACs, however, clearly have too much influence. For example, the National Education Association dictated much of President Carter's agenda in the late 1970s. In order to receive NEAs endorsement, Carter had to pre-empt matters of greater national importance in order to establish a Department of Education.

Some reformers would jump at the opportunity to limit this tyranny. However, others feel that PAC regulations would be futile. For example, if PACs were limited, "instead of getting one check from Lockheed corporation’s PAC a campaign would get five $1,000 checks from housewives with no mention that their spouses are executives with Lockheed" (Sabato, 1993). People of power often find ways around the system.

Besides, limiting PAC contributions may not be a desirable policy. Such reform would eliminate money that is used to educate voters. The focus of reform should be to maintain the same amount of PAC money in the system while increasing the role of the parties -- as a counteractive measure. PAC power should be reformed, but only with great caution, so as to avoid unintended consequences.

IV. Reforms That Work

Reforms that Work

1) Strengthen the FEC by

• appointing a strong-willed, nonpartisan chairman who will better represent the public's interests; give the commissioners more discretion and legal authority.

• changing the size of the Commission from five to six in order to facilitate decision-making (Center for Responsive Politics, 1993).

• having more random field audits (Center for Responsive Politics, 1993).

• opening public hearings to alleged violations (Center for Responsive Politics, 1993)

Strengthening the FEC would enable it to deal with corrupt politicians. This would alleviate some of the public's cynicism towards politics. Moreover, if politicians knew that their chances of getting caught/audited by the FEC were greater, they would be less likely to indulge in corruption in the first place. Reform of this kind would cause a chain-reaction of positive changes for campaign finance.

In order for Congress to reform the FEC, one of two things must happen: Congress must continue to put off campaign finance reform to the point where the public mandates change; or Congress must perfect its bi-partisan approach to reform.

2) Take advantage of the current climate: The Bi-Partisan approach

Many current reform bills contain similar proposals and all of them cover a broad range of campaign finance issues. The Bipartisan Clean Congress Act, for example, "would eliminate PACs, limit individual contributions, give candidates free air time, restrict out-of-state contributions, and bar expenditure of soft money on federal elections" (Editorial, 1996).

The McCain (R-AZ) - Feingold (D-WI) proposal is quite similar, except that it would require 60 percent, rather than 100 percent, of campaign funds to be raised within the candidate's home state (McCain, 1995). It also provides a provision that ensures a level of fairness for those who compete against wealthy candidates.

The bipartisan approach is a step in the right direction, but the specifics of Congress's legislation is still not of the right variety. These sweeping reforms would never get passed Congressional and Presidential authorization. Only modest reform bills that have the effect of slowly changing the system should be submitted to Congress.

3) Ensure equality amongst the candidates

Granting equal conditions to all candidates has always been a cornerstone of campaign finance reform. One area of equity that campaign finance has neglected is that of candidates who wish to finance their own campaigns. Although personal financing saves tax money and shelters the candidate from special interest manipulation, it is potentially unfair for challengers who can not send out as much direct mail or run as extensive an advertising campaign.

Diane Feinstein has come up with an ingenious proposal for controlling the wealthy candidate dilemma. In her scheme, if a candidate declares that he intends to spend more than $250,000 of his funds on the election, then the contribution limits of his opponent will be raised from $1,000 to $5,000. What's more, if a candidate declares that he or she will spend more than $1,000,000 on the race from their own pocket then the contribution limits on his or her opponents are removed entirely" (Feinstein, 1995).

If the wealthy candidate dilemma is exemplified by Feinstein’s 1994 campaign (where her challenger spent $29 million to Feinstein’s $14 million) at the Senate level, then Steve Forbes exemplifies it at the presidential level. Experts estimate that he has spent twice as much as his contenders have in Iowa (Kolbert, 1996).

4) Adjust state expenditure laws to account for New Hampshire and Iowa

Diane Feinstein proposes "voluntary spending limits which would be based upon each state's voting-age population, ranging from a high of $8.2 million in a large state like California to a low of $1.5 million in a smaller state like Wyoming. In return for voluntarily controlling spending, a candidate gets a bonus: thirty minutes of free broadcast time; 50 percent discount on television time over and above the free time; and reduced postage rate on two pieces of mail to each voting age resident in their state. As Lamar Alexander keeps reiterating in his stump speeches and press conferences: "This makes good sense."

Conclusion

Despite the complexity of campaign finance, reformers do benefit from one vantage point: they know how the system works under various conditions (i.e. with public financing and without it; with expenditure limits and without them; etc.). In the pre-FECA days, parties ruled presidential election politics. Today, PACs have more control over political outcomes. Because both situations were laden with corruption, reformers must realize that reform efforts must be more modest than those proposed by Congress.

Herbert Alexander addresses a number of provocative reforms (a single PAC contribution limit but not aggregate PAC limits, closing down leadership PACs, a revised soft money policy that works to supply money to strengthen the political parties as a counterweight to PACs, a tightening of independent expenditures, reducing broadcast costs for political ads, closing a millionaire's advantage by waving limits on contributions on opponents of wealthy candidates spending large amounts of their own money) and stresses the following goals (encourage voter participation, promote voter education on the candidates and issues, diminish incumbency advantage, enhance competitiveness by assisting challengers as much as possible, augment candidate communication with potential voters, and raise public confidence in the fairness of the system). Although some of these reforms are too ambitious for Congressional realities, it's still useful to treat their broad scope as a reference.

The goal of reformers should be to create a balance of power relationship between parties and special interests and candidates. An important addendum to this balance of power notion between parties, PACs and candidates is that it would have to be institutionalized. Laws creating this would be hard to implement because, on the one hand, all the participants would be reluctant to give up any other power to another and, on the other hand, First Amendment restrictions are complicated to get by and often result in legislation that creates more problems than they solve.

Although recent Congressional campaign finance reform proposals have been both bipartisan and substantive -- two important steps in the right direction -- reformers should still assume that Congress does not want to pass legislation that will jeopardize reelection prospects.

An ideal presidential election system would encompass more clean money, voter faith and participation in the system and stronger parties. However, the nature of this system -- that someone besides the candidates must pay for campaigns -- prevents these ideallyics from happening. The reality of the system presents an inescapable irony: if PACs and political parties were put on equal footing, PACs would probably not donate as much because if they know that their ability to persuade politicians is reduced at the whim of party machines, and vice versa. If this were to happen, the flow of money through the system would decrease, introducing a plethora of additional concerns.

Despite the criticisms, public funding and PAC money are the least offensive approaches, constitutionally and practically, to reform. More money properly spent on campaigns equates to more voters informed of their choices, more interest generated in public disclosure, and more motivation arousing citizens to vote.

Campaign Finance Reforms should be modest because, first, they often create new problems and, second, it would be foolish to expect Congress to pass anything revolutionary.