Campaign Finance, Part I: Is This Year Different?

Note: Some numbers in this post are incorrect.  The correction is posted here.

I was initially going to touch on three questions in this post: Is the amount of money in elections this year unusual?  Why do people give during elections, and what effect do campaign donations have on politics?  And what is the administration’s motivation in taking a hard line on campaign finance in the weeks leading up to the election?

It turns out that answering all those questions makes for a very long post, so I’ve broken it up.  In this post, I will look at the amounts of money that have gone into campaign finance over the past few election cycles to see if this year is, in fact, any different.  I will save the other two questions for a post later this week.

There are several different types of campaign donations.  In this post, I will make a distinction between hard money, soft money, and outside spending.  “Hard money” contributions are contributions from individuals or organizations that go directly to a candidates’ campaign or to either political party.  These donations are strictly regulated and must be reported.  The following graph shows hard money to congressional candidates and political parties in recent elections through 2008:

The total amounts of hard money raised in congressional campaigns so far in 2010 are $758.9 million for Democratic candidates and $858.3 million for Republican candidates.  (These numbers, and all the stats and graphs used in this post, were obtained from  Thanks to my friend Matt Fitting for referring me to that site.  I highly recommend you check it out for yourself.)

The number of hard money donations this year are extraordinarily high for a midterm election on both sides of the aisle.  But hard money donations are not the only donations worth looking at.  After all, these are transparent donations, and the administration has been complaining about a lack of transparency from outside groups.  There are several different types of organizations other than campaigns and political parties that can distribute literature, make phone calls, host rallies, and fund ads.  Though there are some limitations on what ads and literature from these groups can say – they cannot specifically promote a candidate for office – these groups can basically say what they want about either candidate or the issues.  Here is outside spending through this year, not including congressional campaign committees:

The gap between the parties closes a little bit when we include congressional campaign committees.  The following is outside spending through 2010, including congressional campaign committees:

I know what you’re thinking:  What happened in 2002?  It looks like both outside campaign spending and hard money donations started going way up after that year.  Well, this happened:

This is a graph showing “soft money” donations in elections through the year 2008 (there haven’t been any soft money donations this year).  Before 2002, political parties could collect unregulated and unlimited donations from individuals and organizations as long as they were used for “party-building activities” and “administrative costs.”  In the mid-90’s, parties started to push the limits on what this money could be used for.  In 2002, in response to a near-doubling in soft money over the previous two election cycles, Congress passed the Bipartisan Campaign Reform Act (BCRA), also known as McCain-Feingold.  The BCRA outlawed any soft money donations to campaigns.  A quick look at the earlier graphs suggests that this money found different avenues.  More money went directly to campaigns in the form of hard money, but even more was directed to outside groups and the congressional campaign committees.  To an extent, the McCain-Feingold reform pushed some donations further under the table, causing some organizations to direct money to less-regulated, independent political organizations rather than political parties.

Did the recent Citizens United decision, which decreased some of the limits on what outside spenders could do, “open the floodgates,” as some Democrats have asserted?  Well, to an extent, yes, but outside spending does not tell the whole story.  The particular datapoint that the administration might like us to emphasize is the difference between outside spending on conservative causes in 2006, the last midterm election, compared to 2010.   In 2006, not including campaign committees, outside groups spent $20 million on conservative causes.  In 2010, that number has increased to $189 million!  That is certainly a large jump.  We should note that the spending from liberal causes jumped from $39 million to $90 million over that same period.  Also, when we include congressional campaign committee spending, the advantage that conservative causes have over liberal ones this year shrinks from $100 million to $70 million.

Let’s take a look back at those hard money numbers.  The amount of hard money, which is completely transparent, is significantly greater than money being spent by outside interests on both sides.  With hard money donations of $750 and $850 million, respectively, Democrats and Republicans have both had record midterm years.  The Democrats have only slightly fewer donations than they had in 2008 and the Republicans have considerably more than they had in 2008.  Usually, we expect to see a dip in donations of every kind during a midterm election.  Outside spending, not including congressional campaign committees, makes up 9% of campaign funds for the Democrats and 17% of campaign funds for the Republicans.  That’s a significant difference, but it may not be the “flood” that some of the campaign rhetoric out there suggests.

In conclusion, outside spending on Republican campaigns has gone way up, but outside spending has gone way up in general, and so has spending on Republican campaigns.  The increase in this one particular type of spending on conservative interests may be alarming, but it’s not clear to me that the increase is particularly out-of-line given the trajectory of spending over the past ten years or so, and given a political climate that seems to strongly favor Republicans (wait for the next post for a better explanation of why this matters).

To be fair, none of this addresses the argument from the administration that funds from outside organizations need to be more transparent.  It just puts the problem in perspective.  If we truly object to the lack of transparency in outside spending, then, as a matter of principle, an increase in outside spending is problematic even if it accounts for less than a fifth of spending on campaigns.  I will address this issue and others in the next post on campaign finance, later this week.

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