UNIVERSITY OF THE WEST INDIES
DEPARTMENT OF GOVERNMENT
GT33M - Contemporary Issues in the Politics of Industrial Societies.Lecture 3 Topic 4 February 9, 2001. Campaign Finance.
The Issue.The campaign chief of William McKinley=s presidential campaign in 1896 said: AThere are two important things in politics. One is money, and I can=t remember the other one.@ A California assemblyman once said: AMoney is the mother=s milk of politics.@
While electoral reforms and voting rights have emerged as two of the most important contemporary issues in American politics, a third one is campaign finance reform. However, this has been an issue of on-going concern and it has been so in all of the industrialized countries. It is expected that Britain will hold its next general elections in May 2001. Already, campaign finance has become an issue leading into the campaign and leading up to the elections.
Capitalist democracies have contradictions between capitalism and democracy: 1. Capitalism is a private activity. Democracy is about the public interest . There is danger that private interests, agendas and orientations might subvert the interests of the public.
2. Capitalism is activity for profit. Democracy is action for service. Profit-seeking and profit motives could turn a democratic service activity into a commodity for sale. The profit motive might corrupt the service ethic.
3. Capitalism breeds division between rich and poor. Democracy strives to equalize social relations. The rich might use the influence of wealth to counteract the vote of the poor.
The nexus between capitalism and democracy - the point at which they intersect - is found in campaign finance. Campaigns are competitions between politicians for office and finance is about competition between rich and poor for influence over who wins office. The issue revolves around ethics and influence. The ethical question is whether the competition for financial support towards campaigns lead politicians to corrupt practices. The question of influence is whether those who have the vote concede real influence to a minority who have the wealth and whether it is the vote or money that really matters in elections. Both questions turn on the nature of democracy - whether politicians primarily represent the ordinary voter or the extraodinarily wealthy and whether the politician is mainly concerned with the interest of the electorate or with special interests and their own personal and political financial positions. It is the kind of issue that is germane to capitalist democracy and the possible contradiction between capitalism and democracy. In other words, it raises the question of whether capitalism corrupts democracy and since profit-seeking is the modus operandi of capitalism, whether it seeks to profit from democracy, turning democracy into a commodity to buy and sell. Susan Rose-Ackerman says: AIn democracies corruption scandals are frequently associated with the financing of political campaigns...money cannot be entirely eliminated from politics. Elections must be financed, and wealthy interests concerned with legislative outcomes and government policy may be willing to foot the bill. Financial pressures give politicians an incentive to accept payoffs, thus working against the other corruption-reducing effects of competitive elections. Observers of the US political system worry that the cost of political campaigns encourages quid pro quo deals. In France and Italy modern parties have lost ideological focus and come to be dominated by business politicians. Many of the recent scandals in those countries involved illegal campaign contributions. The same is true of the recent scandals in Korea and Japan.@ (Corruption and Government, 1999,pp. 132-133). The struggle to separate money and power were there at the birth of democracy with reforms abolishing the pocket burroughs and public voting. For over two hundred years, the link between money and politics has been controversial in the US. The Centre For Responsive Politics says, AIn... a 200 year tradition in which election campaigns have always been privately financed...private money has always been the medium of political democracy.@
America: The Special Case.The role of money in the politics of America is a special case: - American elections always renew the controversy of money in politics because American elections are the most watched in the world and America is the country that is both the wealthiest democracy and the democracy of the wealthiest. - In America, the constitution is most energetically cited as protecting freedoms, including the freedom of speech, and monetary contributions are regarded by the Supreme Court as a form of getting one=s voice heard. Money talks, literally. - In America, interest groups proliferate the most and the fragmented nature of the political system into separate states, legislative comiittees and their separation from executive, and primary as well as legislative elections, all present a number of target points to influence decisions with money. - Being the largest industrial democracy with congressional elections every two years and presidential elections every four years, elections must be conducted regularly and over a wide space, making them especially expensive. - Being a world economic power, American global corporations are especially powerful and they need to influence politics nationally to get markets globally. This means that money is crucial in getting people elected and in getting companies selected for preferential treatment. Companies and individuals give large sums to campaigns to receive concessions: - a wine manufacturer receives US$5 million from the government to promote the sales of wines overseas; - a paper company receives a water pollution waiver to do business worth over US$1 billion; - the ethanol industry gets a tax credit worth almost US$6 billion;
- tobacco companies obtain reprieve from a US$25 million cut in subsidy;
- Clinton used his 50th birthday party to raise money from rich guests, selling
tickets for US$1,500 to individuals and US$10,000 for coporations. In addition,
his guests gave him a US$10 million Abirthday present@ as a present to the Democratic Party.
Politicians encourage political donations.
- the party sold dinners with the president for US$100,000. In one night, such a dinner earned US$3 million.
- two persons, subsequently made ambassadors, were known to have given over US$30,000 and US$260,000 each to the democratic party. (Centre For Responsive Politics.)
Sometimes they get into trouble.- Helmut Kohl and his party are mired in controversy over the illegal channeling of 600,000 pounds to his party; - French president, Jacques Chirac and his party are similarly in controversy over allegations of giving huge building contracts in exchange for party funding.
The Nexus: The Rich and the Powerful.Wealthier elites contend that it is their enterprise and money that make the economy strong and make democracy succeeful. Therefore the controversies over campaign finance is usually one concerning the link between wealth and power. Richer corporations and individuals give more money to pro-capitalist parties like the Republicans in America or the Conservative party in Britain. Other categories of contributors more strongly associated with power and wealth also give more to pro-capitalist parties. Men give more money compared to women by a margin of 75:25 in American campaigns. Whites give vastly more than blacks. An Organisation called Public Campaign said, APeople of Color are largely absent from what has become one of the most crucial elements of the election process, namely campaign financing.@ It referred to a study in 1997 that showed that 90% of those who give money were white. Blacks of course have lower and less disposable incomes. In all fifty American states, the predominant amount of money come from people who were white and wealthy. Minorities have less money to elect their own or to influence white representatives and therefore the campaign finance system creates a huge disadvantage for them. Wealthy people do better in politics. They get elected more because they can afford it more. One report says: AGiven the vast sums of money required to run for office, increasing numbers of very wealthy people are going into electoral politics - and winning. At least 71 of 435 United States House of Representatives are millionnaires and 26 out of 100 United States senators are millionnaires, compared to less than one-half of one per cent of the American public. This means that millionnaires are overrepresented in the House by a factor of more than 3,000 percent and in the Senate by a factor of more than 5,000 percent.@ In 1993, 15% of Americans lived below the poverty line. The suggestion is that America is a plutocracy not a democracy. (Opensecrets.org).
Who Wins and Loses.Wealthier persons win. Wealthy persons and corporations try to get legislation passed that gives them subsidies, tax credits, tax shelters, contracts, permits, waivers, amendments - various devices that help their markets and profits. They target key legislators such as those on the House and Senate Ways and Means Committees. These committees initiate legislation and are concerned with finding ways and means to tax and spend. These members are some of the most heavily financed by private contributors. So, the US tax system is skewed towards the wealthy. The 1999 tax reform law gave the richest ten percent of Americans 70% of tax benefits. On average they benefitted by US$7,500 on average in tax cuts per year, while the bottom 60% got only US$157 per year. At the same time, corporations get legislators to create so many loopholes in the tax laws that between 1989 and 1995, a majority of corporations paid no taxes at all. And, in 2000, corporations obtained tax preferences to the extent that they saved US$195 billion. George W. Bush campaigned on giving a tax break of US$1.3 trillion, mainly to the wealthiest Americans. He received much more campaign money from them than Gore did. Politicians like Bush argue that easing the pressure on the wealthiest means giving incentives to those who control the economy to invest more to everybody=s benefit. Many voters buy this. But many working people lose. Working people lose. In 1998, business outspent unions by US$566 million on campaigns to get loose and ineffective labour laws. The result is that business has gotten Congress to cut funding to and reduce the effectiveness of the enforcement action of the Occupational Safety and Health Administration, set up to enforce labour safety codes. Every year six million Americans get injured or ill on the job and 50, 000 die from work-related accidents. It would cost companies more to meet safety and health standards and to pay compensation. Corporations got Congress to cut spending on Medicare by US$115 billion over five years. The money, they say, would be better spent on coporations that exist to create wealth rather than welfare that consumes wealth, especially the welfare of the sick and elderly who are not productive. When workers get pay increases, there is usually a quid pro quo, for corpoartions to get even larger tax deductions as cost concessions. Congress only agreed to increase the minimum wage after it was agreed that corporations could get a US$20 billion tax cut. Corporations also contribute to campaigns to get legislators to loosen quality standards that impose costs on them, such as when environmental groups want restrictive polluting practices. In the 1998 elections, energy and natural gas sectors outspent environmental interest groups by 50 to 1 even though a CNN poll showed that 68% of Americans believed that environmental protection was a higher priority than economic growth. The US has decided to delay the deadline for reducing carbon dioxide emissions that pollute the atmosphere (The Kyoto Agreement). The gas companies gave US$4.4 million to the Democratic Party campaign.
A New Thesis About Money in Politics.Money has become more prominent in politics today. Robert Putman in his study, ABowling Alone,@ makes this argument. Between 1910 and 1940, there was a more civic-minded population that participated in the community forms that built human relations and trust in democracy - trade unions, PTA=s, parties, campaign networks, community organisations etc. This promoted social capital, that is, the accumulation of habits and attidues that build trust in political and economic life. But this civic generation has passed and now many organisations with large members have arisen more as advocacy organisations that concentrate not on building social capital, but on economic capital - money. Money has come to replace people in civic-political life. Political parties have come to depend more on paid staff than on unpaid volunteer workers. They depend more on advertisement and media management (public relations and >spin=) than on people trying to convince each other through direct human contact. In Europe, Putman also finds that religious and union organisations are similarly depending more on money. The same is true for parties, so that people are less active party members, and vote less, expecting money to do the work. This all adds up to a fall off in the trust placed in public institutions. Ironically, for all the talk about civil society and civic participation today, these organisations depend on money more than people as the older networks did. (Martin Woolacott, Guardian, Nov. 24, 2000). The evidence is there. Elections have become more expensive and money-driven; and countries are trying in largely futile attempts to sanitise the system through >clean money, clean politics= initiatives. The last American elections was the most expensive in American history, a new record of spending. It cost US$4 billion, 50% more than in 1996. This includes the cost of administering the elections.
Most campaign funds come from corporations, unions, and wealthy individuals connected to business and finance. Most ordinary Americans don=t give money to campaigns. In 1968, only 8% gave any money to any candidate or party in any election - federal, state or local. By 1992, this had fallen to 4%. In 1992, about 80% of money came from Political Action Committees (PACs - committees formed to raise campiagn money), mainly corporate PACs, individuals contributing US$200 or more, a mere 1% of the population, and wealthy candidates. This caused one Senator in 1993 to say: AThe buying and selling of political influence is a longstanding, though shameful tradition in American politics.@ (Centre For Responsive Politics.)
The presidential and congressional campaigns also set new records. The presidential campaigns cost over one-third of a billion. Bush spent US$100 million just on his primary elections alone. One senator spent US$60 million of it his personal money on his bid to be re-elected to the senate. It is clear that a candidate has to be wealthy or have wealthy friends or have the trust of wealthy people to get elected in the higher political offices. Complaints have been made that the last elections saw the most massive use of unregulated, and unlimited funds; where campaigns were hungrier for money than at any other time, and where money ruled the campaigns.Bush raised US$187 million; Gore, US$133 million, Nader, US$6 million. In addition, the Republican National Committee (RNC - the party=s central, federal organisation), raised US$214 million and the equivalent Democratic National Committee (DMC), raised US$179 million on presidential and congressional campaigns. In the 1994 elections, senate candidates contributed or loaned themselves US$28 million and House candidates contributed or loaned themselves US$34 million. And, the world=s leading democracies are all mired in financial scandals. (Polly Toynbee, Guardian, January, 26.) A spokesman for the Centre for Responsive Politics admitted: AThe growing role of money in the political system is a growing problem;@ and, AThere=s just been a constant downpour of money running all over the political process this year. This election will go down as the most expensive so far.@ Bush and Gore accepted US$67.7 million in public funds as an incentive to limit their dependence on private finance. But they didn=t. Congressional campaigns have a limit of US$1 million from individuals and US$5,000 from PACs. But there are ways to avoid these limits. One of these ways is by relying on >soft money=. This is money that doesn=t go directly to the candidates but to their campaigns to use for media ads, fundraising, to pay staff, print materials, provide transport and canvas, all the things politicians would have spent it on anyway. Even the Chairman of the Federal Election Commission said, AWe haven=t seen an election like this since 1972 in terms of the effectively unlimited amounts of money being spent.@(M. Ellison, M. Kettle, Guardian, November 7, 2000). The problem was so great that Bush=s competitor for the Republican nomination, John McCain, campaigned on the issue of finance reform. Gore said he would make the MacCain plan his priority. But Bush had no commitment to campaign finance reform. After all, his party benefits more from corporate money. The Republicans benefit more from the electoral college, voting discrimination against minorities and big money in politics. They are less likely to reform any of these.
Campaign Rules and How They are Avoided.The first attempt to limit campaign funding in America was in 1905 and 1908, aimed at limiting the disproportionate amount of money in politics from wealthy individuals. After scandals in the 1972 elections, a Federal Election Commission (FEC) was set up in 1974. Its biggest innovation was to introduce partial public provision of campaign finance. Under the Act: - Individuals and groups are limited to contributing US$1,000 directly to campaigns, not exceeding US$25,000 per year. - Contributions from foreign nationals and corporations are prohibited. (If democracy is to be for sale, it must be to Americans only, not foreigners). - Candidates can refuse federal funding and so be released from any obligations regarding limits. Bush did so in 2000. - Candidates can also be supported by independent efforts where the money doesn=t go directly to their campaigns. Much TV ads are financed this way. Besides candidates simply establish independent cause organisations called PACS. These are shell organisations. These PACS are barely separate from the campaigns. People do give money for ideological reasons but also to influence and win favour from candidates. Many Ambassadors get their appointments from the size of their contributions. Most of the money goes to media ads, creating a close link between the media and politics. In the US, candidates buy media time. In Britain, the media provides more air time to candidates. Gore has suggested that politicians be given free air time and that an endowment fund be established to provide campaign finance. (Julian Glover, Guardian, August 11, 2000). US law provides tax exemption for organisations formed for the explicit purpose of influencing elections and nominations for office. But they are also required to reveal the names of their donors. Organisations get around this by not explicitly endorsing candidates but nonetheless say favourable things about them or about the issues they stand for, and so do not have to disclose their financial support to candidates (like the powerful National Rifle Association (NRA), fighting against gun control). Since 1996, the rise of >issue advocacy= groups has circumvented the previous rules of campaign financing. The US Supreme Court ruled in 1976 that an ad had to use words like Avote for@ and Asupport@ before an ad could be deemed to be supporting a candidate rather than an issue. These organisations focus on issues not on candidates but the campaign issues can easily be linked in the voter=s mind with the candidates. This means many civil society organisations formed around issues are veiled organisations to put money and influence into campaigns for candidates. They extoll the virtues of candidates they like and villify those they don=t, on issues like gun control, abortion, prayers in schools. This appears to conform to the Supreme Court ruling of 1976 that said limits on contributions made directly to candidates is constitutional and helps to combat corruption. So, advocacy organisations channel money indirectly into the campaigns of candidates. They then fall outside of the disclosure laws and make contributions secretive.
Money Has Changed American Democracy.This has changed American democracy in radical, unprogressive ways: - the cost of mounting a campaign is a disincentive to people of ordinary means. Less than 1% of Americans run for elective office; - the number of self-financed candidates is growing; - parties are nominating more candidates able to raise their own money; - candidates are spending more time raising money; - candidates who spend more on a campaign win by 92% in House races and 88% in Senate races, showing that money does count. (1996 study, Electronic Policy Network). - in the last four presidential primary elections, the candidate who spent more money won the party=s nomination, on both the Republican and Democratic sides; - the chase after money structures how candidates spend their time, where they travel, to whom they speak, and what their legislative agendas are. Money might not determine how legislators vote all the time but it does give preferential and inequitable access at least. It exaccerbates conflicts of interest and fuels the public perception that monied interest unfairly dominate public policy. It favours incumbents and heightens their reelection rates. Incumbents are already in office and a safer bet to back. Most incumbents win their elections by far, compared to challengers. Money makes for more uncontested elections at the state level. Many state legislators are returned unopposed because of their ability to fund and win their elections. Money enforces one party dominance of the House. Since the 1980's the Republicans have dominated the House and Senate, since the FEC Act permitted PACs and Issue Advocay Groups through which wealthy corporations can channel money to Republican candidates. All of these detract from competitive democracy. The FEC cannot enforce regulations. It has three Democratic and three Republican members who are usually deadlocked over controversial issues, and besides Congress has no real interest in regulating money that benefits their campaigns and their reelection.
What Can Be Done?
AMoney is a problem in all democracies, and efforts to deal with the problem have yielded disappointing results...Scandals have arisen in most countries...Levels of corruption are not closely connected to the levels of public subsidies or the intensity of the regulation of party and campaign finance. The institutional, political, and legal order in which the political financing system is embedded seems critical, not the rules governing campaign finance.@ (Mann).The political finance tools available to reformers are: disclosure, contribution limits, spending limits, public subsidies, and regulation of campaign activity. But these often fail to lessen corruption, or the influence of monied interests, slow campaign spending, or increase electoral competitiveness. Possible reforms are: Full Public Financing: Here the state would pay for all campaign finances. This would be difficult for federal elections in the US because of the >freedom of speech= caveat in the Constitution and the deadlock between Democrats and Republicans on the FEC. However, some states are considering, what they call, the clean money option. The downside is that citizens may not want to pay (taxes) to finance politicians at a time when they are generally held in low regard and in the US only half the population votes for any presidential candidate and one-third for congressional candidates anyway. Also, public funding would have to be equitable for all parties. This might encourage fringe, extremist and offensive parties, fragment the political system and confuse voters. Besides, the experience so far in industrial democracies is that ways and means can be found to circumvent legal limitations of private financing. Deregulation: The opposite remedy would be to remove all restrictions on private financing - the sources and sizes of contributions to candidates and parties; end all public financing of presidential campaigns. It would conform with those who interpret the US constitution as regarding financial contributions as a form of free speech. But this would simply reinforce the problem of money in politics. Ban on Soft Money, Issue Advocacy Groups: These have been proposed, the former more strongly than the latter. But they face resistance from Republicans and from >freedom of speech= advocates. (Thomas Mann: The US Campaign Finance System, 1999).
Getting Around the Law.Many countries have instituted laws to limit private contributions. But these laws cannot control the problem, and besides, they are riddled with loopholes.
America.The FEC Act of 1974 constituted the first comprehensive regulation of election campaign finance in US history. It: - prohibited finance from corporations and unions; - limited what a candidate could spend from his personal and family funds; - limited total spending in presidential and congressional elections; - strengthened disclosure laws; - provided for partial public financing; - established the FEC to enforce the Act. Before the Act could take effect, the Supreme Court ruled (Buckley vs Valeo, 1976), that corruption or the appearance of it could justify limiting campaign contributions but that the state interest was insufficient grounds for limiting individual contributions. The Court said: AThe concept that government may restrict the freedom of speech of some elements of our society in order to enhance the rights of others is wholly foreign to the First Amendment.@ The Court related campaign finance to freedom of speech. Literally, money talks. Through campaign finance, individuals are able to influence (talk or speak for) their political causes. The Court threw out mandatory limits on overall spending, independent spending by PACs, and the use of personal funds by candidates. It said limits were permissable only where it prevented corruption or the appearance of corruption, and those limits could only apply to funds explicitly used for candidates using the magic words, Avote for,@ or Asupport.@ This opened the door for PACs. Their numbers increased from 604 in 1974 to 4009 in 1984. Their contribution to congressional candidates increased from US$12 million to over US$100 million over the same period. Campaign funding from indivdiuals giving US$500 or more doubled. Soft money became prominent - funds raised not for the expressed purpose of influencing an election. Such funds were not covered by the FEC Act. Also the FEC Act applied to federal elections, not state elections and many states retained permissive rules allowing corporate and union financing. Besides, many political activities were in the grey area between federal and state/local elections, such as registration, get-out-the vote drives and generic party advertising. Soft money increased from US$$19 million in 1980, to US$$22 million in 1984, to US$83 million in 1992 and US$262 million in 1996. Issue advocacy groups mushroomed and spending on ads rose dramatically. One estimate is that US$$135million to US$$150 million was spent on issue ads to influence the 1996 federal elections.
Britain.On February 16, a new Political Party Act comes into force in Britain which limits the amount of money each party can spend in the coming campaign. Under the Act: - each party is limited to spending 22,500 pounds per constituency; - parties must report all donations to the party centre of 5,000 pounds or more; - foreign donations are banned. The amount of money that each party will be able to spend will vary between 14 and 20 million pounds each, dependening on whether they compete in all the constituencies and whether the election is called in three months (May) or longer ( in which case there will be a longer campaign and more spending will be allowed). (Ireland introduced a Politcal Ethics Law in 1995 to limit private donations to campaigns as well).
Japan.Japan reformed its campaign laws in 1995 under the Political Funds Control Law (effective January 2000), insisted upon by the Japan Socialist Party, then a coalition member with the Liberal Democratic Party (LDP). The idea was to ban corporate contributions to individual politicians. Under these stricter laws: - there is strict government control over campaigns. - campaigns run for only 12 days; - a candidate is allowed only one car, a small number of posters and a printed materials for a campaign; - candidates are allowed a few, government-financed advertisements or TV appearances;
Canada.- A tax credit for campaign contributions exist for amounts between $200 and $500; - parties and candidates must submit audited reports of campaign expenses after elections;
Conclusion.By definition, industrial societies are wealthy and dominated by industrial corporations. The problem of wealth comes ironically to be a threat to democracy. It raises questions about free and fair elections. Free speech is important for free elections but since money talks, free speech permits wealth to skew the advantages of being elected to a wealtheir party, candidate and class of people. It raises questions about the influence of the voter. Wealth usurps the influence of the ordinary voter. The majority voting preference might suffer at the hands of the minority who contribute most of the money. Is it the majority of the people who matter or the majority of the funds ( that are contributed by a minority of the people)? It raises questions about democratic equality. All adult citizens have the equal right to vote. But since voting is not the only or even the main form of influence on politics, and since money is as, if not more important, then those who have it - wealthy, white, males have greater influence than poorer racial minorities and females, and this is not democratic equality. Democrats say that democracy provides the freedom of individual initiative and enterprise necesssary to make economies successful. But the irony is that this same wealth and a wealthy class, once created, undermines that very democracy.
Topic 1 | Topic 2 | Topic 4 | Topic 5 | Topic 6 |Topic 7 | Topic 8
GT33M Course OutlineGT33M Tutorial Questions