Campaign Finance Markets Moving into the Black Market 96% of all elections are won by the candidate who spends the most money

There is a campaign finance market The demanders are the candidates The suppliers are the donators Past legislation to limit demand has failed Limits on supply have been passed but are being challenged as an infringement of first amendment Money has moved to the black market as "dark" money spent by 527 groups and superpacs Past legislation has fail to meet goal of less influence and more transparency

5.9 How healthy is the American Political System

5.14 How open or closed is the system to you? 5.15 Impact of barriers?

Presidential address to Congress 12/03/06 "I again recommend a law prohibiting all corporations from contributing to the campaign expenses of any party. Such a bill has already passed one House of Congress. Let individuals contribute as they desire; but let us prohibit in effective fashion all corporations from making contributions for any political purpose, directly or indirectly." Which president? After he won the election of 1904 Theodore Roosevelt became a big proponent of limiting contributions. 1906

President Obama state of the union address 2013

We’re still talking about the same issue. Why?

96% of all elections are won by the candidate who earns the most money- the perception is that money has a huge impact on outcome. Is it … Quid pro Quo (something for something) or 1 st Amendment (freedom of expression) Money will always find a way into elections.

Money has a huge impact on the outcome of elections.

96% of all elections are won by the candidate who earns the most money Somethings to consider: Correlation does not mean causation. Is spending more money resulting in victory? Or is the better candidate and/or the candidate most likely to win receiving more donations?

Money Wins Presidency and 9 of 10 Congressional Races in Priciest U.S. Election Ever Big Spenders = Big Winners Let's face it, candidates who are the bigger spenders may not always win but they usually do, as has been the case over the last fifteen years in more than 80 percent of House and Senate contests. Even in "open races," with no incumbent running, better-funded candidates won 75 percent of the time.

2010In 85 percent of House races and 83 percent of Senate races, the candidate who spent the most money ended up winning. 2008“In 93 percent of House of Representatives races and 94 percent of Senate races... the candidate who spent the most money ended up winning.” 2006“In 93 percent of House of Representatives races and 67 percent of Senate races... the candidate who spent the most money won.” 2004“In 95 percent of House races and 91 percent of Senate races... the candidate who spent the most money won.” “Just over 95 percent of U.S. House races and 75 percent of Senate races were won by the candidate who spent the most money.“

2000“The candidate who spent the most money won 98 percent of the elections for positions in the House of Representatives. In the Senate the percentage was 85 percent.” 1998“In 94 percent of Senate races and 95 percent of House races, the candidate who spent the most money won.” 1996“92 percent of House races and 88 percent of Senate races were won by the candidate who spent the most on the election.”

There are few things in life more predictable than the results of a congressional election if the incumbent is seeking re-election.

Friendship is a Wonderful Thing

Are incumbents re-elected because of the money? Or do the get money because they are most likely going to be re- elected?

If their approval is so low, why do they still receive the money from PACS?

If 96% of all elections are won by the candidate who spends/raises the most money. If PAC donate more to the incumbents than they do challengers If incumbents have a re-election rate of +90%. Then why would the group that seems to benefit the most from the money want to restrict it? After he won the election of 1904 Theodore Roosevelt became a big proponent of limiting contributions Something to consider

Questions to consider for this lesson. Do campaign contributions lead to corruption and quid pro quo (something for something), think Iron Triangles? (5.8) Or Do campaign contributions represent free speech? (5.1)

The vast majority of campaign money comes from individual donations. But on a per donation basis, special interest and PACS (corporations, and unions) provide more.

Is political freedom the same or different than economic freedom? Do they have the same results? Are they inter-changeable?

Quantity of Private Donations Access Influence/Control Time/effort S Quantity supplied= the amount that donators are able and willing to donate/contribute Price= access Law of Supply- when the amount of access increase- donation increase, when access drops donations drop. The candidates power and seniority also plays a role Market for Campaign Donations

Quantity of Private Donations Access Influence/Control Time/effort D Quantity demanded= the amount that politicians are able and willing to accept and spend Price = access/influence Law of demand- when a donator wants more access/influence/control the candidate is less likely to accept the donation. When a donator expects less access the candidate is more willing to accept. Market for Campaign Donations

Quantity of Private Donations Access Influence/Control Time/effort S D P fm Q fm Quantity supplied= the amount that donators are able and willing to donate/contribute Quantity demanded= the amount that politicians are able and willing to accept and spend Some believe the natural equilibrium point is too high- the optimal level is lower Market for Campaign Donations Law of supply- the greater the access/influence/control the larger the donation. As access/influence/control drop the small the contribution Law of demand- the greater the access/influence/control needed to give, less will be the demand.

Supply side attempts Intended to limit overall supply of private money in the system

Demand side attempts Intended to decrease politician's demand and desire for private money

“Money like water, will always find an outlet.” -Justice Stevens and Justice O’Connor SCOTUS What are the two justices trying to say about attempts to reform how campaigns are financed?

Full Disclosure Black Market

When it comes to campaign finance is disclosure important? Why Or Why not? Disclosure- To know who donated to the candidate and how much they donated.

Congressional Actions

History of Campaign Finance Throughout 1800’s it was well known that corporations paid money to gain favorable legislation and influence – Congress passed the Tillman act – corporations can no longer donate Congress passed the Taft Hartley - union can no longer donate Unions and Corporations created Political Action Committees. They were created and funded by these groups in order to pool money from members and donate the money to campaigns. Would you consider the Tillman Act and the Taft Hartley Act and Demand Side or a Supply Side approach? Did the acts lead to more or less disclosure? Explain

History of Campaign Finance Soft money emerges (money indirectly given to a candidate) and also independent ads and T.V. commercials Congress Passed the Federal Election Campaign Act- This Act placed limits on PAC contributions of hard money (money directly donated to campaigns) and also creates disclosure rules about contributors. Would Consider the Federal Election Campaign Act (1971) a Demand Side or a Supply Side approach? Pass or Fail Did the acts lead to more or less disclosure? Explain

Federal Election Commission After the Watergate scandal Congress creates the commission to enforce the Federal Election Campaign Act provisions. Additionally, restricted individual contributions to $1000 and the PAC limit to $5000. History of Campaign Finance Would Consider the Federal Election Campaign Act (1971) a Demand Side or a Supply Side approach? Pass or Fail Did the acts lead to more or less disclosure? Explain

History of Campaign Finance Bills with the intention to limit the of raising or the spending of contributions by candidates all fail to pass Congress. 1986, 1988, 1990, 1992, 1994, 1996, 1997 Would Consider these failures a Demand Side or a Supply Side approach?

History of Campaign Finance Bill Partisan Campaign Reform Act (BCRA) – Increase limits on hard money eliminated soft money from campaigns Restricts dark money by limiting ads 60 days prior to campaign Goal- increase transparency by eliminating soft money markets and incentivizing donators to enter the hard money market by raising donations and access in hard money, and by placing restrictions on the dark money market.

Would Consider the BCRA a Demand Side or a Supply Side approach? Pass or Fail Did the acts lead to more or less disclosure? Explain 527 groups- groups independent from politics that create issue ads. These ads are not suppose to mention candidates by name, only they issues

What types of restrictions does Congress pass? Demand side or Supply side? Supply side attempts Intended to limit overall supply of private money in the system Demand side attempts Intended to decrease politician's demand and desire for private money Why do you think they favor supply side over demand side? Why would incumbents wish to pass campaign finance reform? Impacts of supply-side approaches Lower the amount per contributions has two effects. 1.It makes it more difficult for a new candidate to compete with the incumbent. The incumbent has a treasure chest of money, party support, face recognition, free publicity, and a staff that can help him/her campaign. The challenger needs to work harder and spend more to secure numerous donations. 2.By limiting the amount of donations you are in effect limiting the amount of control and influence that they can exert on the candidate.

Which of the two options would make it more difficult on the challenger to compete with the incumbent? Restricting demand to a point where all candidates could only raise and spend a specific amount of money? Or Restricting the supply, in which donators were limited to how much they could spend on an election? Ideas to consider? ReputationRelationships Repeating gamesResources

Supreme Court Rulings

Buckley v Valeo (1976) Facts of the case In the wake of the Watergate affair, Congress attempted to ferret out corruption in political campaigns by restricting financial contributions to candidates. Among other things, the law set limits on the amount of money an individual could contribute to a single campaign and it required reporting of contributions above a certain threshold amount. The Federal Election Commission was created to enforce the statute. Question Did the limits placed on electoral expenditures by the Federal Election Campaign Act of 1971, and related provisions of the Internal Revenue Code of 1954, violate the First Amendment's freedom of speech and association clauses? Conclusion In this complicated case, the Court arrived at two important conclusions. First, 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. Second, the Court found that governmental restriction of independent 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.

2008- Citizens United created a movie about Hillary Clinton to be aired just prior to the election. F.E.C.- says no SCOTU rule (5-4)in favor of Citizens United saying that they could run the ad/movie and then asked the parties to reargue the case about the constitutionality of limiting funding from private organizations The second opinion (5-4) and much broader is that 527’s can spend money as they please and that spending money is free speech. Also corporations and unions are created by people and therefore if they want to create 527’s they cannot be limited in scope and spending as long as they did not directly contribute to the candidates. Additionally issue ads rules are only limited to PACS and not 527’s

Speech now vs FEC- SCOTUS said FEC could not limit donations to independent PAC (527’s) Contribution limits as applied to SpeechNow "violate the First Amendment by preventing [individuals] from donating to SpeechNow in excess of the limits and by prohibiting SpeechNow from accepting donations in excess of the limits." The Super PAC is born

Government Action Tillman 1907 Taft-Hartley 1947 FECA (1971) FEC (1974) Failed Bills BCRA Demand side or Supply side Pass or Fail? More or less disclosure?

Government Action Buckley v. Valeo (1976) Citizens United v. FEC (2010) SpeechNow v. FEC Demand side or Supply side Pass or Fail? More or less disclosure?

Outcomes

After reading…

New Campaign Reforms 1. Goal: 2. Plan: 3. What incentives are you changing? 4. What are the cost and benefits of your plan? 5. Is your plan impacting the supply or the demand of campaign money? 6. Connect your plan to the 1 st amendment. Are you hindering or advancing the first amendment specifically Political Expression 7. Relate it to Freedom and Equality. 8. Prediction: Would your reform be passed by Congress? Why or why not? You have 2 minutes to present your plan

There is a campaign finance market The demanders are the candidates The suppliers are the donators Past legislation to limit demand has failed Limits on supply have been passed but are being challenged as an infringement of first amendment Money has moved to the black market as "dark" money spent by 527 groups and superpacs Past legislation has fail to meet goal of less influence and more transparency

Where do they spend their money? Travel Expenses such as food, dress, fuel, renting out venues, and other items Staffing and advisors Campaign Ads