An Introduction to Federal Campaign Finance

Campaign finance plays a central role in the democratic process. Elections can’t happen without campaigns, and — to state the obvious — running a campaign costs money. Lots of it. (Political campaigns at the state and federal levels have become much more expensive in recent years.) So where does all the money come from? It may be a daunting question, but it’s an important one to ask in our effort to become more informed citizens.

The collection of laws that govern how campaigns are funded is often referred to as the campaign finance system. But in truth, “system” may be a bit of a misnomer — at least if “system” conjures up images of intentionally organized and consistently applied rules. In reality, like so many other elements of our ever-changing democracy, the modern campaign finance system was not designed in one sitting. Rather, it came into being through a (sometimes haphazard) series of legislative and judicial decisions.

Don’t let this complexity put you off. This series about money in politics will help dispel some of the mystique surrounding this topic.

A basic overview

Let’s start with the basics. We focus here on federal campaign financing, which includes elections for the office of the president and vice president, U.S. House of Representatives, and U.S. Senate. When someone decides they wish to be elected to one of these positions, they must register as a candidate and run a campaign to try to convince enough voters that they are the best person for the job. This necessarily involves publicity and persuasion, which often take the forms of door-to-door canvassing to meet potential voters, speaking at town halls to explain positions on particular issues, attending local community events to listen to public concerns, and (of course) advertisements on TV, on the radio, online, and/or sent via mail. These activities all cost money.

While a small percentage of candidates are wealthy enough to self-fund their campaigns, most cannot. So candidates ask for contributions (i.e., donations). In theory, this is a mutually beneficial situation, where candidates receive the money they need to run a (hopefully successful) campaign, and citizens have the opportunity to provide financial support to candidates who best represent their interests. However, in practice, questions about how much money a voter can contribute, and to whom, can be a bit tricky. 

Federal contribution limits were established (first in 1910) to define a maximum amount of money an individual could donate to a political campaign. This was intended in part to protect against the inevitable inequality that arises from the simple fact that low-income individuals do not have as much (or any) money to donate to political candidates compared to high-income individuals. Without contribution limits, very wealthy individuals can make huge financial contributions to a candidate to try to disproportionately advance their own political priorities. This is the essence of corruption. Expenditure limits (aka spending limits) were also passed into law in 1971 to define a maximum amount of money campaigns could spend on broadcast media.

Both contribution and expenditure limits were intended to keep the playing field more or less level. However, not all election spending comes directly from candidates’ campaigns. Federal contribution and expenditure limits were designed for money given to both official campaigns and to independent groups that spend money in elections. 

What are independent groups? These include corporations, labor unions, nonprofit organizations, and political action committees (PACs) — organizations that are formed to raise or spend money for or against specific candidates or legislation. Independent groups are also referred to as outside groups, as in groups that are “outside” of or “independent” from the official political parties and campaigns. Independent spending during election cycles has skyrocketed since 2010. 

Why 2010? Over the last several decades, there were a number of important Supreme Court decisions that significantly influenced the campaign finance arena. One of those impactful Supreme Court rulings was the case Citizens United v. FEC, which was decided in 2010. In brief, Citizens United found that legal limits on how much money an independent group could spend on political campaigning were unconstitutional, as long as the independent group did not coordinate the spending directly with candidates (since that would undermine their independence).

Subsequently, a related court case, SpeechNow.Org, decided that federal contribution limits to independent groups were also unconstitutional because they violated the First Amendment right to freedom of speech. This can seem complicated because, well, it is. But stay tuned for MWEG’s next library piece on money in politics, which will dive deeper into the details and ramifications of Citizens United. 

These court decisions enabled the rise of “super PACs” — PACs that are allowed to raise unlimited funds. This significantly altered the realities of campaign finance. Super PACs have also allowed wealthy donors to partially obscure the origins of their contributions, meaning it is often impossible to know exactly where all the money spent for or against a particular candidate came from. This lack of transparency can undermine the ability of voters to make fully informed choices.

So why even bother? 

If you’re feeling overwhelmed, you’re not alone. While we don’t all need to be experts on these topics, it is important to have some basic understanding of how our campaign finance system works. This is a necessary part of promoting ethical government and holding our candidates and elected officials accountable. 

In a representative democracy, personal wealth or access to wealthy fundraising networks should not be a prerequisite to running for office. This deeply held belief likely explains the bipartisan public support among Americans for campaign finance reforms. A 2015 poll by The New York Times and CBS News found that 84% of Americans believe money has too much influence in political campaigns. A 2018 Pew Research Poll also found that a large bipartisan majority of Americans supported political spending limits for individuals and organizations and were in favor of adopting new campaign finance laws to reduce the influence of money in politics. 

Unfortunately, research suggests that the interests of average Americans have little impact on policy outcomes, while, in contrast, the interests of the economic elite and organizations representing business interests have a highly significant impact on policy. In theory, a campaign finance system that elevates the voices of everyday Americans would help promote deliberation and stimulate compromise by increasing accountability among elected officials to their constituents rather than to wealthy donors.

What comes next?

There are a lot of topics to discuss when it comes to money in politics, from discouraging issues to potential reforms. This introduction has only scratched the surface. Some questions you may still have about federal campaign finance might include:

• What is illegal coordination between super PACs and candidates, and why does it still occur? 
• What is “dark money,” and how is it related to foreign interference in our elections? 
• Why are online political advertisements so difficult to regulate? 
• Are the laws adequately enforced when violations of campaign finance laws occur?

Keep reading along — our next library piece on this topic will dive into some of the answers to these questions.