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

3. 5.9
How healthy is the American Political System

4. 5.14
How open or closed is the system to you?

5. After he won the election of 1904
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

6. President Obama state of the union address 2013

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

8. 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
1st Amendment (freedom of expression)
Money will always find a way into elections.

9. Money has a huge impact on the outcome of elections.

10. 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?

11. Money Wins Presidency and 9 of 10 Congressional Races in Priciest U. S
Money Wins Presidency and 9 of 10 Congressional Races in Priciest U.S. Election Ever- 2008
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.

12. 2010
In 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 percent of Senate races were won by the candidate who spent the most money.“

13. 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.”

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

16. Friendship is a Wonderful Thing

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

19. http://www. gallup. com/poll/161771/congress-approval-remains-slump

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

21. After he won the election of 1904
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?
Something to consider
After he won the election of 1904
Theodore Roosevelt became a big proponent of limiting contributions.
1906

22. 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)

23. 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.

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

25. Different ideas to “solve” the issue
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.

26. Market for Campaign Donations
Access
Influence/Control
Time/effort S
Quantity of Private Donations
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

27. Market for Campaign Donations
Access
Influence/Control
Time/effort D
Quantity of Private Donations
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.

28. Market for Campaign Donations
Access
Influence/Control
Time/effort
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. S
P fm D
Q fm
Quantity of Private Donations
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

29. History of Campaign Finance
Throughout 1800’s it was well known that corporations paid money to gain favorable legislation and influence.
Tillman act - corporations can no longer donate.
1947 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.
1971- FECA- limits on PAC contributions of hard money (money directly donated to campaigns) and also creates disclosure rules about contributors.
Soft money emerges (money indirectly given to a candidate) and also independent ads and T.V. commercials.

30. Limits on demand later deemed unconstitutional Supply Side
Demand Side
Not enforced.
Limits on demand later deemed unconstitutional
Supply Side
Limits hard money but not soft money
Supply Side
Congress enacts new amendments to comply with ruling.
Demand Side
Less restrictions
SCOTUS- rule demand side restrictions Unconstitutional
Proposals to limit spending deemed unconstitutional and an attempted amendment fails
Demand Side- failed
failed
Demand Side- failed

31. Failed Demand Side- failed Passed Supply side- passed Passed
Eliminates soft money
Limits campaign ads
Limits of ad- overruled by supreme court
Supply side
Passed
Supply side
Less restrictions
All groups including corporations and unions can advocate for a candidate
Contributions to non political groups cannot be limited

32. Reputation Relationships Repeating games Resources
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?
Reputation Relationships
Repeating games Resources

33. Why would incumbents wish to pass campaign finance reform?
Impacts of supply-side approaches
Lower the amount per contributions has two effects.
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.
By limiting the amount of donations you are in effect limiting the amount of control and influence that they can exert on the candidate.

35. 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.

36. “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?

37. History of Campaign Finance
2002- 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.

38. Remember supply shifters?
Cost in this case is disclosure
Price is access, lower access in one market, suppliers go to new markets
Easier to make commercials- internet
Any restriction on any of the 3 campaign markets will result in an outward shift of supply for the other two, as money seeks its own outlet

39. 3 markets for campaign finance
Hard Money market
Money directly given to candidate
Full disclosure
Access
influence
Direct
Donations s D
Soft Money market
Money indirectly given to candidate
Less disclosure
Access
influence
indirect
Donations s D

40. 3 markets for campaign finance
Dark Money market
Money not given to candidates but instead used outside the political process – 527 groups, Superpacs, issue ads
No disclosure
Access
influence
Dark Money s D

41. Full Disclosure
Black Market

42. History of Campaign Finance
527 groups- groups independent from politics that create issue ads. These ads are not suppose to mention candidates by name, only they issues
2008- Citizens United created a movie about Hillary Clinton to be aired just prior to the election. F.E.C.-  says no

43. History of Campaign Finance
2010- SCOTU says (5-4)that Citizens United 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)
The Super PAC is born

44. “Money like water, will always find an outlet.”
If government is going to things to impact business, business will do things to impact government.

48. After reading…

50. 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 1st amendment. Are you hindering or advancing the first amendment?
7. Relate it to Freedom Equality.
8. Prediction:
Would you reform be passed by Congress? Why or why not
You have 2 minutes to present your plan

51. 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

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

53. 5.9
How healthy is the American Political System

54. 5.14
How open or closed is the system to you?