Financing the 2008 Election: Assessing Reform

The nation elected its first African American president, and the Republicans nominated their first female candidate for vice president. More money was raised and spent on federal contests than in any election in U.S. history. Barack Obama raised a record-setting $745 million for his campaign, and federal candidates, party committees, and interest groups also raised and spent record-setting amounts. Moreover, the way money was raised by some candidates and party committees has the potential to transform American politics for years to come.

Contributors: Allan Cigler (University of Kansas), Stephanie Perry Curtis (Brigham Young University), John C. Green (Bliss Institute at the University of Akron), Paul S. Herrnson (University of Maryland), Diana Kingsbury (Bliss Institute at the University of Akron), Thomas E. Mann (Brookings Institution). David B. Magleby is dean of the College of Family, Home, and Social Sciences and Distinguished Professor of Political Science at Brigham Young University. He is the author of Financing the 2000 Election, a coeditor with Corrado of Financing the 2004 Election, and coauthor of Government by the People (Pearson Prentice Hall), now in its 21st edition. Anthony Corrado is Professor of Government at Colby College and a nonresident senior fellow in Governance Studies at the Brookings Institution. He is a coeditor of Campaign Finance Reform: A Sourcebook and a coauthor of The New Campaign Finance Sourcebook, both published by Brookings. BROOKINGS INSTITUTION PRESS Washington, D.C. www.brookings.edu

Financing the 2008 Election

The latest installment in a series that dates back half a century, Financing the 2008 Election is the definitive analysis of how campaign finance and spending shaped the historic presidential and congressional races of 2008. It explains why these records were set and what it means for the future of U.S. politics. David Magleby and Anthony Corrado have assembled a team of experts who join them in exploring the financing of the 2008 presidential and congressional elections. They provide insights into the political parties and interest groups that made campaign finance history and summarize important legal and regulatory changes that affected these elections.

Magleby / Corrado

The 2008 elections were by any standard historic.

Financing the 2008 Election

DaviD B. MagleBy & anthony CorraDo, eDitors

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Financing the 2008 Election

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Financing the 2008 Election David B. Magleby Anthony Corrado editors

Brookings Institution Press Washington, D.C.

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about brookings The Brookings Institution is a private nonprofit organization devoted to research, education, and publication on important issues of domestic and foreign policy. Its principal purpose is to bring the highest quality independent research and analysis to bear on current and emerging policy problems. Interpretations or conclusions in Brookings publications should be understood to be solely those of the authors. Copyright © 2011

the brookings institution 1775 Massachusetts Avenue, N.W., Washington, D.C. 20036 www.brookings.edu All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Brookings Institution Press. Library of Congress Cataloging-in-Publication data Financing the 2008 election / David B. Magleby and Anthony Corrado, editors. p. cm. Includes bibliographical references and index. Summary: “Provides analysis of how campaign finance and spending shaped the historic presidential and congressional races of 2008; latest in a series of volumes on the costs and trends of campaign finance published since 1960”—Provided by publisher. ISBN 978-0-8157-0332-7 (pbk. : alk. paper) 1. Campaign funds—United States. 2. Presidents—United States—Election—2008— Finance. 3. United States. Congress—Elections, 2008—Finance. 4. United States— Politics and government—2001–2009. I. Magleby, David B. II. Corrado, Anthony, 1957– III. Title. JK1991.F575 2011 324.7'80973090511—dc22 2011003798 987654321 Printed on acid-free paper Typeset in Sabon Composition by R. Lynn Rivenbark Macon, Georgia Printed by R. R. Donnelley Harrisonburg, Virginia

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Contents

Acknowledgments 1

Adaptation and Innovation in the Financing of the 2008 Elections

ix 1

David B. Magleby

2

The Regulatory Environment of the 2008 Elections

48

Anthony Corrado

3

Financing the 2008 Presidential Nomination Campaigns

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John C. Green and Diana Kingsbury

4

Financing the 2008 Presidential General Election

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Anthony Corrado

5

Financing the 2008 Congressional Elections

166

Paul S. Herrnson and Stephanie Perry Curtis

6

Political Parties and the Financing of the 2008 Elections

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David B. Magleby

7

Interest Groups and the Financing of the 2008 Elections Allan Cigler v

249

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Lessons for Reformers

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Thomas E. Mann

Glossary

307

Contributors

321

Index

323

List of Tables and Figures Tables 1-1. Individual Campaign Contribution Limits over Two-Year Election Cycle, Pre-BCRA and Post-BCRA 1-2. Political Ads, by Type, 2004 and 2008 Federal Election Cycles 1-3. Overall Spending, 2000–08 Federal Elections 1-4. Number of Reported Contributions in Presidential Election Years 3-1. Adjusted Receipts and Disbursements, 2008 Presidential Nomination Campaigns 3-2. Source of Funds of Major Parties, 2008 Presidential Nomination Campaigns 3-3. Outside Money, 2008 Presidential Nomination Campaigns 4-1. Joint Fundraising Committee Activity, 2008 Presidential General Election 4-2. Independent Expenditures by Top Groups, 2008 Presidential General Election 4-3. Electioneering Communications Spending by Top Groups, 2008 Presidential General Election 4-4. Campaign Finances, 2004 and 2008 Presidential General Elections 5-1. Party Contributions and Coordinated Expenditures, 2008 Congressional Elections 5-2. Party-Connected Contributions, 2008 Congressional Elections 5-3. PAC Contributions, 2008 House Elections 5-4. PAC Contributions, 2008 Senate Elections 5-5. Individual Contributions, 2008 House Elections 5-6. Individual Contributions, 2008 Senate Elections

8 17 19 33 93 96 104 140 148 149 151 177 180 188 190 195 197

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contents 6-1. Hard-Money, Soft-Money, and Combined Receipts, 1996–2008 Elections 6-2. Source of National Party Committee Receipts, 2000–08 Elections 6-3. State and Local Party Committee Receipts, 2000–08 Elections 6-4. Party Committee Contributions to Candidates and Number of Recipient Candidates, 1994–2008 Elections 6-5. Coordinated Expenditures by Party Committees, 1994–2008 Elections 6-6. Independent Expenditures by Party Committees, 1996–2008 Elections 7-1. PAC Contributions to Candidates and Parties, 2000–08 Federal Elections 7-2. Top PAC Contributors to Candidates, 2007–08 Federal Election Cycle 7-3. Independent Expenditures by Top Groups, 2007–08 Federal Election Cycle 7-4. Internal Communications Costs, 1980–2008 Federal Elections 7-5. Top 527 Committees with More Than $1 Million in Receipts, 2007–08 Federal Election Cycle 7-6. Top Contributions to 527 Committees, 2007–08 Federal Election Cycle

vii

214 216 228 236 238 239 260 261 264 267 272 275

Figures 1-1. Inflation-Adjusted Expenditures, 1976–2008 Congressional and Presidential Campaigns 1-2. Cumulative Itemized Receipts from Individuals to Presidential Nominees and National Party Committees, 2004 and 2008 Federal Elections 1-3. Unitemized Contributions to Presidential Candidates as Share of Total Contributions, 2007–08 1-4. Source of Receipts to National Party Committees, 2000–08 Federal Elections 1-5. Hard-Money Receipts to National Party Committees, 2008 Election Cycle

18

24 32 35 37

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3-1. Cumulative Receipts, Democrats, by Month, January 2007–July 2008 3-2. Cash on Hand, Democrats, by Month, January 2007–July 2008 3-3. Cumulative Receipts, Republicans, by Month, January 2007–July 2008 3-4. Cash on Hand, Republicans, by Month, January 2007–July 2008 5-1. Party Receipts, 2008 Congressional Elections 5-2. Party Contributions, Coordinated Expenditures, and Independent Expenditures, 2008 Congressional Elections 5-3. PAC Contributions and Independent Expenditures, 2008 Congressional Elections 5-4. Source of House Candidates’ Receipts, 2008 Congressional Elections 5-5. Source of Senate Candidates’ Receipts, 2008 Congressional Elections 6-1. Individual Contributions to National Party Committees, 2007–08 Election Cycle 7-1. PAC Contributions to Candidates, 1979–80 to 2007–08 Election Cycles

107 108 112 113 173 174 185 200 201 223 257

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Acknowledgments

F

ollowing the 1960 election, Herbert Alexander published a book summarizing the financing of that competitive and historic election. What started out as a book about a single election has become a series of volumes and later edited volumes. In this book we build upon the work of Professors Alexander, John Green, and Kelly Patterson who wrote or edited volumes on the financing of previous federal elections. One of our aims in producing these volumes is to make them relevant to the ongoing public policy debate over campaign finance and electoral politics. Several colleagues join us as chapter authors, combining a focus in their particular area of expertise with a broad knowledge of American politics. John Green, who edited the volume in this series on the 1996 election, examines the financing of the nomination phase in a chapter in this book. Paul Herrnson, an expert on congressional elections, helps us understand the dynamics of contests for seats in the House and Senate, explaining the battle for control of each chamber and a quest for a filibuster-proof Democratic majority in the Senate. Stephanie Curtis provided special assistance with the FEC data throughout this volume and coauthored chapter 5 with Professor Herrnson. Allan Cigler, an authority on interest group behavior, provides insights on two important roles of interest groups in 2008: first, their contributions to candidates and parties, and second, the money they spend electioneering for and against federal candidates. Additionally, Thomas Mann wrote a concluding chapter where he considers prospects for future campaign finance reform in light of court decisions, regulatory actions and inactions, and lessons learned ix

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acknowledgments

from 2008. We especially thank these colleagues who have shared their insights in this volume. We are grateful for the financial support provided this project by the Carnegie Corporation of New York. Geraldine Mannion, the Strengthening U.S. Democracy Program Chair at Carnegie, has for three election cycles seen the importance of a timely, balanced, and thorough examination of how U.S. federal elections are financed. The book benefited from a parallel research project funded by the Pew Charitable Trusts and conducted by David Magleby and teams of academics in five battleground states. We express appreciation to Michael G. Caudell-Feagan, deputy director, and Carolyn Race, manager of operations, at the Pew Center on the States, as well as Rebecca W. Rimel, Pew president and chief executive officer, for their support. We also extend appreciation to our respective academic institutions for their support of our work. At Brigham Young University the project benefited from the valuable assistance of a team of able undergraduate research assistants: Aaron Anderson, Rebecca Eaton, Jeff Edwards, Bret Evans, Maren Gardner, Eric Hoyt, David Lassen, Virginia Maynes, Haley McCormick, Grady Nye, Kristin Orr, and Case Wade. At Colby College, Zachary Ezor and Andrew Wade provided research assistance. At Brigham Young University, editorial assistance was provided by Hillary Hendricks and grant management support was provided by Gary Reynolds at the Office of Research and Creative Activity, Kathleen Rugg in Research Accounting, and Marilyn Webb in the College of Family, Home and Social Sciences. Our friends at Brookings were helpful and patient with us as we produced this volume. We express appreciation especially to Robert Faherty, Chris Kelaher, and Janet Walker of the Brookings Institution Press. We also thank the two anonymous reviewers whose comments and suggestions improved the book and to Katherine Kimball who provided a careful copyedit. Finally, we dedicate this volume to our spouses, Linda Waters Magleby and Susan McIlvaine Kenney. Their love and encouragement supports us in all we do. David B. Magleby Anthony J. Corrado

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Adaptation and Innovation in the Financing of the 2008 Elections david b. magleby

T

he 2008 elections were by any standard historic. The nation elected its first African American president, and the Republicans nominated their first female candidate for vice president. More money was raised and spent on federal contests than in any election in U.S. history. Moreover, the way money was raised by some candidates and party committees has the potential to transform American politics for years to come. Barack Obama raised a record-setting $745 million for his campaign. While Obama’s fundraising was extraordinary, other federal candidates, political party committees, and interest groups also raised and spent record-setting amounts in the 2008 election cycle. The 2008 election was the second in a row in which the Democrats picked up more than twenty-eight seats in Congress, something neither party has done since the Republicans gained twenty-eight seats in 1950 followed by a gain of twenty-two in 1952.1 Part of the reason for the Democrats’ recent ascendancy is the success of their party congressional campaign committees in raising money in limited amounts from individuals. The Democratic congressional campaign committees substantially outspent the Republicans. Other components of the Democrats’ dominance in 2008 included their skillful use of technology in voter contacting, fundraising, and volunteer recruiting. Compared with their efforts in previous years, Democraticleaning interest groups cooperated much more efficiently in 2008, sharing membership and contact information through a new database that appeared to best the microtargeting capacity of the Republican National 1

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Committee’s voter tracking system. Another Democratic advantage was the absence of successful Republican front groups. While interest group spending overall rose in 2008, no group mounted attack ads on the scale of those used against presidential candidates in 2000 or 2004. Perhaps the most important advantage for Democratic candidates was the national issue agenda, especially public disapproval of President George W. Bush.

Issue Agenda The election was in many respects a referendum on the Bush presidency. Many in the public strongly linked the Bush administration with increasingly negative opinion toward the war in Iraq. The war became a distinct liability for Republicans in 2006 and 2008, though they had used the issue to their advantage during the 2002 and 2004 elections. Opposition to the Iraq War provided presidential candidates like Obama and Republican Ron Paul with an early springboard in recruiting supporters and raising money. Support for the war, especially for the 2007 troop surge, was a major focus of the McCain campaign, but the issue faded in importance following the collapse of Bear Stearns and Lehman Brothers, two large financial firms, in mid-September.2 President Bush and senior administration officials sought to calm an anxious public as stock values dropped and the possibility of an economic depression loomed. John McCain suspended his campaign to return to Washington to attend to the crisis, while Obama did not. Instead, Obama announced that he intended to participate in the first presidential debate, with or without McCain.3 President Bush convened a meeting at the White House attended by McCain and Obama. After the meeting McCain returned to campaigning and participated in the presidential debate. The sense of uncertainty about the government response to the economic crisis was amplified when House Republicans initially voted against the administration’s bailout proposal. Early in the crisis, McCain repeated a statement he had made earlier that the “basics of the economy are sound.”4 The Obama campaign used this statement as an example of McCain’s lack of understanding about the economy. President Bush’s declining popularity helped the Democrats not only in the presidential race but also in key congressional battlegrounds. Democratic congressional candidates, including some freshmen incumbents and Democrats running for open seats that had been Republican going into

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the election, also ran against Bush at least as much as against their Republican opponents. In the North Carolina Senate race between Republican incumbent Elizabeth Dole and Democratic challenger Kay Hagan, for example, the Democratic Senatorial Campaign Committee ran an effective ad in which two elderly men sitting on a porch debated whether Senator Dole is ninety-two or ninety-three—highlighting the fact that she voted in agreement with President Bush 92 percent of the time and was ranked ninety-third in effectiveness in the Senate. More generally, the Obama campaign established change as the overriding message of the election and reinforced that theme repeatedly. Obama promised to make changes in international relations (particularly the war in Iraq) and domestically in energy, health care, education, and economic and regulatory policy. Also central to Obama’s campaign was the theme of changing the tone in Washington. Obama’s nomination itself symbolized a dramatic change, and his possible election as the first African American president became a subtext for the entire election. McCain tried to change the theme of the election from a referendum on Bush and eight years of Republican control of the White House to a referendum on Obama, highlighting, as Hillary Clinton had done in the primary campaign, his inexperience. But those efforts largely failed.

More Candidates, More States in Play As is the norm in presidential election years, the focus in 2008 was on the contest for the presidency. The absence of a current or former president or vice president seeking the nomination, for the first time in more than half a century, attracted a wide field of candidates in both parties. Three sitting U.S. senators became the central players in the nomination phase: Republican senator John McCain of Arizona all but secured the Republican nomination after the Super Tuesday primaries on February 5, 2008, and with Mike Huckabee’s concession in early March the contest was over. Democratic U.S. senators Hillary Clinton (New York) and Barack Obama (Illinois) waged a nomination contest that included primaries and caucuses in all states and territories, holding aside the disputed early contests in Florida and Michigan.5 Just as the field expanded in the Democratic nomination contest, so too the electoral map for the general elections grew to include states that had been safely Republican—North Carolina, Indiana, and Virginia, for example—and states that had been trending less Republican, such as

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Nevada and Colorado. This had the effect of forcing McCain to defend states that had been safe for Bush in 2000 and 2004 while having also to compete in perennial battlegrounds like Ohio, Pennsylvania, and Florida. One important reason more states were in play was the substantial money advantage Obama had in both the nomination and general election phases of the campaign. He outspent Senator Clinton through May 2008 by $43.8 million (see chapter 3), and in the general election Obama and the Democratic National Committee (DNC) outspent McCain and the Republican National Committee (RNC) by $150 million (see chapter 4).6 Obama’s spending and aggressive campaigning in states that Bush had taken for granted, combined with McCain’s limited spending as a result of accepting public funding, meant that McCain had to make hard choices in resource allocation. As happened in the 2006 midterm election, the Democrats and their interest group allies succeeded in expanding the playing field of competitive congressional races in 2008. In the years following redistricting, competitive U.S. House races typically decline in number. In the 1990s, for example, the number of competitive races in early October of each election year declined in a linear manner over time. Since 2000 a different pattern has emerged: there were fewer competitive contests in 2002 than in 1992, but the number of competitive contests rose in 2006 and 2008.7 In 2006 and 2008 Democrats targeted vulnerable Republican incumbents in both houses but especially in the U.S. Senate. The success of Barack Obama in bringing into play once solidly GOP states like North Carolina, Colorado, and Virginia helped Democratic congressional candidates.

Electronic Electioneering Technology and the Internet reached new levels of importance in 2008. This was true in fundraising but also in persuasion and electioneering. Over the eight years leading up to the 2008 elections there had been glimpses of the potential of the Internet as an organizing and fundraising tool. In 2000 John McCain’s campaign was recognized by scholars as having “the most successful Internet effort,” raising a reported $6.4 million online.8 Interest groups like MoveOn.org also successfully used the Internet to raise money and mobilize volunteers.9 In 2004 the Howard Dean campaign raised about $20 million online.10 In 2008 Republican candidate Ron Paul developed what one observer called “a rabid online community” and surprised many with his fundraising success. His exten-

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sive use of the Internet demonstrated the potential of these tools for both parties.11 But the Obama campaign integrated technology, message, and strategy in ways not seen before. As Joe Trippi, who worked on the Dean campaign, put it, “It’s like the Dean campaign [was] the Wright brothers, [and] the Obama campaign was Apollo 11.”12 Part of this owed to the candidate himself, who was committed to the use of technology, and part to the dynamics of the initially steep uphill battle for Obama. As the campaign began, Obama was considered to be significantly behind Clinton in both fundraising ability and name recognition. Quite likely motivated by this campaign reality, Obama reached out to individuals and groups that are traditionally underused in political campaigns, among them youth and minorities. He maintained a large network of field offices, staffed mostly by volunteers, and put to use the strengths of his volunteers—their high levels of enthusiasm and energy and their capacity to use technology—to build support and electoral success in time-intensive caucus states. Jon Carson, the national field director of the Obama campaign, praised Obama’s ability to generate new voter contacts through creative use of Internet social networking: “As a community organizer himself, he knew the value of a list and the value of using every opportunity to get that work done.”13 Complementing the campaign’s frequent text messaging and e-mails to supporters, a major innovation was Obama’s own social networking website, My.BarackObama.com.14 Obama’s early and continued opposition to the war in Iraq also helped build his popularity with many influential liberal voices on the Internet, such as Arianna Huffington and Markos Moulitsas.15 The net effect of this was an estimated 7 million supporters who were connected to the Obama campaign in some way through social network and campaign website programs.16 By the time of the election the Obama campaign had an e-mail list of 10 million, and that number rose to 13 million by the time he took office.17

The Rules The rules for financing the 2008 federal elections were based in large part on the 1974 post-Watergate amendments to the Federal Election Campaign Act of 1971 (FECA) and on the Bipartisan Campaign Reform Act of 2002 (BCRA), which took effect with the 2004 election cycle. These major legislative structures left to the Federal Election Commission (FEC) important roles in rulemaking and enforcement. The courts have been

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important in upholding some provisions of FECA and BCRA while declaring other parts unconstitutional.18 In 2008, for example, court rulings since the previous presidential election changed some aspects of the law, particularly with respect to the timing and types of advertisements run by interest groups. The underlying principles of both acts center on contribution limitations and disclosure. Together, the laws require disclosure of candidate, party committee, group, and large individual contributions to candidates and disclosure of what candidates, party committees, and groups spend on federal elections. Meanwhile, the laws limit what individuals and groups can give to federal candidates, political party committees, political action committees (PACs), and other committees that finance federal election activity and are therefore subject to federal law. Several different groups were created by these rules. Often these groups are referred to by the section of the law they fall under; thus the rules in some ways define the players. Section 527 organizations are taxexempt nonprofit organizations that have as their “principal purpose” political activity. Technically they encompass both groups that register with the FEC as political committees and those that do not. The most visible of the 527s have been organizations that are involved in politics but have not registered as political committees with the FEC.19 Through much of the 2000 election cycle, Section 527 organizations could avoid disclosure by not registering with the FEC and thereby not having income to report to the IRS. That has changed, and some disclosure is now required through the IRS.20 Section 501(c) of the Internal Revenue Code defines a range of organizations, some of them charitable and tax exempt, with different restrictions on what, if any, role such groups can play in political campaigns. Organizations established under Section 501(c)3, for example, are charitable organizations. Contributions to these organizations qualify as tax deductions, and the organizations are the most restricted in terms of campaign activities. They “cannot endorse candidates, contribute to campaigns, or organize a political action committee. However, they can conduct nonpartisan voter registration and get-out-the-vote efforts in accord with FEC regulations as well as participate in activities related to state and local ballot measures. In addition, they may sponsor candidate forums on issues of public concern.”21 By contrast, Section 501(c)4 groups are public advocacy organizations and have significantly more latitude in electioneering, so long as election activity is not their primary purpose.22

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Disclosure Although debate continues about many aspects of campaign finance regulation, there is widespread consensus on the need for transparency, or disclosure.23 The campaign financing laws mandate reporting to the FEC of all contributions from individuals, party committees, and PACs. For individuals, once a person has given more than $200 to a particular candidate or political committee in an election cycle, that donor’s name is disclosed and becomes available to the FEC. Specified types of contributions to Section 527 organizations are reported to the IRS by the committee receiving the contribution. Donors whose combined contributions to a candidate do not exceed $200 are not identified by name in FEC reports. Their contributions, however, are disclosed. The Bipartisan Campaign Reform Act expanded on the FECA disclosure rules by requiring “disclosure of the costs of electioneering communications by any spender who exceeds $10,000 in aggregate expenditures and the disclosure of any contributions of more than $1,000.”24 Electioneering communications that must be disclosed are television and radio advertisements that refer to a federal candidate and are broadcast within thirty days of a primary or sixty days of an election. State parties are also required to disclose any money spent on voter registration or voter mobilization efforts if a federal candidate is on the ballot.25

Contribution Limitations A second element of current campaign finance rules is contribution limitations for individuals giving to candidates, party committees, or political action committees and for party committees and PACs giving to candidates or to each other. Table 1-1 provides the contribution limits for individuals over the two-year election cycle, before and after passage of BCRA. Under FECA, an individual could give $50,000 over each election cycle to parties, candidates, and PACs combined. The aggregate limit under BCRA was almost doubled, to a two-year cycle limit of $95,000. Most of the contribution limits under BCRA are indexed for inflation, so the aggregate amount an individual was allowed to contribute to parties, candidates, and PACs in 2007–08 rose to $108,200.26 Of this total, an individual could contribute in most cases $4,600 to a candidate ($2,300 in the primary and $2,300 in the general election) and in the event of a runoff another $2,300. The total of an individual’s contributions to all federal candidates in 2007–08 was capped at $42,700. The remaining $65,500 of

2,000

2,100a

2,300a

2,400a

2004

2006

2008

2010

10,000

25,000

30,400a,b

28,500a,b

26,700a,b

10,000c

10,000c

10,000c

c

5,000

a,b

20,000

To any state or local party (per year)

5,000a

5,000a

5,000a

5,000 a

5,000

To any PAC or other political committee (per year)

45,600

42,700

40,000

37,500

25,000

To candidates

57,500 (37,500)d 61,400 (40,000)d 65,500 (40,000)d,, 69,900 (45,600)d

25,000

To parties and political committees

Aggregate total per year

115,500

108,200

101,400

95,000

25,000

Overall

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Source: Adapted from Center for Responsive Politics, “Campaign Contribution Limits” (www.opensecrets.org/ overview%20/limits.php [August 2009]). a. Subject to aggregate limit. b. Per party committee. c. Levin funds, subject to state law but not subject to the aggregate limit. d. Figure in parentheses is maximum amount of larger total to political committees.

a

1,000

Pre-BCRA

To any candidate committee (per election)

To any national party committee (per year)

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Year

Dollars

Table 1-1. Individual Campaign Contribution Limits over Two-Year Election Cycle, Pre-BCRA and Post-BCRA

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an individual’s two-year cycle limit could be contributed to party committees or PACs. An individual could give $28,500 to any single national party committee in 2007–08. In addition, an individual could give up to $10,000 to a state or local party committee. This includes a category of contribution, sometimes called Levin funds after Michigan senator Carl Levin’s amendment to BCRA, that represents “funds raised and spent by state, district, and local party committees for federal election activity, subject to a combination of state and special federal restrictions,” including that they “may not refer to a clearly identified candidate for federal office.”27 An individual could also give up to $40,000 to PACs, with a limit of $5,000 to a single PAC per year.28 Thus an individual wishing to give the maximum allowable in a federal election must contribute more to interest groups or party committees than to candidates. Individual contribution limits do not apply to candidates’ spending of their own money, including loans they may take out to fund their campaign. The presence of self-financed candidates or the possibility of such candidates in the future prompted an amendment to BCRA. Dubbed the Millionaires Amendment, this addition to the act included a provision intended to level the playing field between wealthy, self-financed candidates and their opponents. From 2004 through 2006, candidates whose opponents used a large amount of personal money to fund their campaigns were allowed to accept three to six times more in contributions from individuals than would otherwise be permitted under BCRA. In 2004 this amendment was invoked in twelve house races and eight Senate races.29 The 2004 race between Pete Coors (R) and Kenneth Salazar (D) for the open Colorado seat in the U.S. Senate was one of those contests. Because Coors loaned his campaign $571,000, the provision allowed Salazar to raise an additional $750,000 from individuals who had previously contributed to him, helping him secure victory.30 The Millionaires Amendment was declared unconstitutional before the 2008 election.31

Public Funding For presidential elections FECA established a system of partial public financing in the nomination phase and full public financing in the general election phase. The source of the funds is a voluntary tax check-off on federal income tax returns. Taxpayers who check the box on the return allocate a few dollars of the money they are already paying in taxes to go toward the Presidential Election Campaign Fund. In the nomination phase, FECA allows public funds to be used to match individual contributions of up to

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$250 to participating candidates if the candidate to whom the contribution has been given has raised at least $5,000 in amounts of $250 or less in at least twenty different states.32 Candidates who accept the public match must also accept state-by-state and overall spending limits for nomination-phase campaigning. Candidates can decline the public match and its spending limits, which most major candidates did in 2008. The Federal Election Campaign Act also offers a grant to major-party candidates in the general election in lieu of their doing additional fundraising for their campaigns. The amount of the public grant, which is indexed to inflation, was $84.1 million in 2008.33 Minor-party candidates may qualify for partial general election funding, based on their party’s electoral performance.34 Candidates participating in public financing for the general election cannot accept additional private donations, and they commit to spending no more than the grant they receive (not counting money raised and spent from a separate account for legal fees and accounting expenses).35 Public funds are also provided for the major-party conventions, including in 2008 a grant of $16.3 million to each major party. Minor parties are entitled to a partial grant if they meet established criteria.36 Within the contribution limits for individuals, parties may raise money to cover convention expenses. Certain supplemental services may be provided by the host city and state, including additional public transportation to and from the convention site. Between 1976 and 2000, John Connally in 1980 and Steve Forbes in 1996 and 2000 were the only major contenders to decline the matching funds in the nomination phase. There were other less well-known candidates who did not take public funds during this period, principally for ideological reasons.37 The 2000 election marked the first time a successful nominee, George W. Bush, declined matching funds, relying instead on his network of contributors to fund the nomination campaign without the match and the encumbrance of the spending limits.38 Bush demonstrated that candidates could on their own raise more than the limits allowed and not suffer in public favor by declining public funding. In 2004 Republican incumbent George W. Bush and Democrats John Kerry and Howard Dean all chose to forgo matching funds. By 2008 it was assumed that most serious candidates would not accept the match, and that was the case with John McCain, Mitt Romney, Rudy Giuliani, Hillary Clinton, Barack Obama, and Bill Richardson.

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Reasons not to accept the public matching funds start with the constraints of the state-by-state spending limits—a growing problem because of the front-loading of the caucuses and primaries, which makes early heavy spending in excess of the limits more important.39 An even greater problem is the overall spending limit, since the cost of running has far outpaced the amount a candidate is allowed to spend.40 This problem became greater as candidates opted out of the public financing system. To compete with those who opted out, all candidates would probably need to raise and spend more than the matching system allowed.41 Moreover, when the contribution limits were increased under BCRA, the limit on an individual contribution that qualified for public matching was left unchanged, at $250. Thus the increase in contribution limits served to reduce the relative value of the public dollars. Taken together, then, there were several strategic reasons for candidates to decline public financing in the nomination phase. Although the matching fund system of partial public financing declined over three election cycles, the public funding grant for general elections had been accepted by all nominees until 2008, when Barack Obama declined the grant. Obama, who at one point had pledged to accept public funding if nominated, reversed himself. But he did not pay a price in public support for his reversal.42 By declining the grant, he was able to continue fundraising for his own campaign throughout the general election, something McCain, by accepting the grant, could no longer do. But Obama would not be able to rely so heavily on his party committee, which without his share of the presidential fundraising would not play its traditional supporting role. As Anthony Corrado and Molly Corbett observe, Obama’s choice involved the risk “that he would not be able to compete financially with McCain and his party”—a risk that was “minimized by the fact that Obama had already raised a substantial amount of general election money well before the end of the primary season.”43 Obama achieved a financial superiority that meant he could outspend McCain and the Republican Party committee allies in the air and on the ground in an expanded field of play.

Party Money The Federal Election Campaign Act limited the amount of individual and PAC contributions to candidates and parties. Party committees are organized around the units of competition in our national government. The

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Democratic and Republican national committees focus primarily on presidential elections, state parties, and to a lesser extent congressional races.44 The congressional campaign committees are organized to help House Democrats (Democratic Congressional Campaign Committee) and House Republicans (National Republican Campaign Committee) or Senate Republicans (National Republican Senatorial Committee) or Senate Democrats (Democratic Senatorial Campaign Committee). Party committees provide important services, including candidate recruitment and training, opposition research, financial support, and assistance with fundraising. Not long after FECA took effect the parties began asking for access to more resources. This led to important Federal Election Commission rulings that permitted unlimited contributions from individuals and interest groups to political party committees for “party building purposes.”45 This unlimited money, or “soft” money, could even be given to party committees by corporations and unions from their general treasury funds, funds that had long been off limits for candidates and party committees.46 The FEC’s advisory opinions regarding the 1979 amendments were later exploited by candidates and party committees to circumvent the FECA limits. By 1996 the “party building” purposes of soft money had been expanded, in practice, to include candidate-specific electioneering, and in 2000 and again in 2004 more than $500 million in soft money was raised and spent by the party committees, often to pay for television ads, mail, and electioneering that were largely indistinguishable from candidates’ campaigns.47 Moreover, candidates were actively seeking soft money for their party committees, as the Clinton White House sleepovers and coffees showcased. Soon congressional party and committee leaders were also courting soft-money donors. The Bipartisan Campaign Reform Act banned party soft money and in so doing prompted a debate over the future viability of the party system without it. Republicans had been more successful in raising hard money, and so it was widely assumed that BCRA advantaged them. Democrats had become more dependent on soft money. For example, in 2000 and 2002 the Democratic Senatorial Campaign Committee gleaned 66 percent and 61 percent of its receipts, respectively, from soft-money contributions. In contrast, soft-money contributions to the National Republican Senatorial Committee for 2000 and 2002 totaled 46 percent and 53 percent, respectively, of all funds raised.48 With respect to the impact of the softmoney ban on the Democrats, some went so far as to argue that BCRA was a suicide bill; others used less dramatic language to contend that the

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law would “threaten the reinvigoration of national parties and the revitalization of America’s federal democracy” or “make it much more difficult for strongly institutionalized party organizations to emerge.”49 By banning soft money, BCRA created a need for party committees to target individual donors, but it also created added opportunities for those donors to contribute to party committees. The incentive was built into the individual contribution limits. A donor who had maxed out on contributions to candidates could still give $28,500 to a party committee, and if giving to more than one, up to $65,500. How have the party committees responded to BCRA? Has the law severely impaired the parties? These questions are explored in detail in chapter 6, but the short answer is that the parties have successfully adapted their fundraising efforts. In 2004, the first post-BCRA election, the party committees in the aggregate raised more hard money than they had raised in hard and soft money combined in 2000. This means that, in effect, the party committees more than doubled their hard-money receipts. In 2000 the Democrats raised $213 million and the Republicans $362 million in hard-money receipts for national and congressional campaign committees. When soft money is included, 2000 receipts increase to $470 million for the Democrats and $620 million for the Republicans. In hard money only in 2004, total Democratic receipts were $576 million and total Republican receipts were $657 million, surpassing what the parties had raised in hard and soft money combined in 2000. In 2008 that happened again: total combined receipts for Democratic national committees were $599 million, and for Republican national committees, $640 million. There is some variability in fundraising performance of party committees based on committee leadership and perceived electoral opportunities and—in 2008 especially—on whether the presidential standard-bearer accepts public funding and its contingent proscription against general election campaign fundraising. A presidential standard-bearer who accepts public funding in the general election can encourage individuals to give to the national party committee. That is what George Bush and John Kerry did in 2004, and John McCain in 2008. Such efforts yielded substantial sums for the RNC in 2004 and 2008 and for the DNC in 2004. Funds raised by the national committees can be spent in joint candidate–party committee voter mobilization efforts or in advertising that mentions both the candidate and the party. Obama’s decision to bypass public funding meant that he continued to seek contributions for his campaign and through joint fundraising

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committees with the DNC. This gave him more control over message. As one McCain staffer put it, Victory operations [joint McCain-RNC] cannot be candidate specific and they can’t be just about the presidential campaign—they need to be about the entire ticket. And in an election where the Republican Party brand was damaged, where the incumbent president was a Republican and was incredibly unpopular . . . being a Republican is not necessarily the way you want to brand yourself if you want to win the campaign.50

Electioneering Communications A second major objective of BCRA was to define in statute what had been defined only in court decisions. The 1976 U.S. Supreme Court decision on the constitutionality of FECA, Buckley v. Valeo, distinguished between “express advocacy” in an election setting, which was deemed permissible for regulation, and “issue advocacy,” which had a broader purpose and could not be regulated by FECA. Congress had not defined the difference in the FECA legislation, but the Court illustrated the distinction in a footnote to its opinion. The note defined express advocacy as “communications containing express words of advocacy of election or defeat, such as ‘vote for,’ ‘elect,’ ‘support,’ ‘cast your ballot for,’ ‘Smith for Congress,’ ‘vote against,’ ‘defeat,’ ‘reject.’”51 Communications lacking these magic words, even when clearly about electing or defeating a candidate, were not subject to disclosure or limitation as to the source of funding or the amount the group could spend. Just as political parties exploited soft-money rules to spend unlimited amounts of money, especially in 1996 and thereafter in candidate-specific electioneering, so too interest groups began to use issue advocacy to attack or promote particular candidates. In 1996 the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) spent more than $35 million on ads mostly targeted to the defeat of freshmen Republicans in the House of Representatives.52 The union spent this in addition to hard money it contributed to candidates and party committees. Business interests quickly followed suit with ads from allied groups. In 1998 and subsequent cycles, “front groups” with innocuous names like Citizens for Better Medicare, Coalition to Make Our Voices Heard, and Council for Better Government ran issue advertising in the immediate

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preelection period clearly aimed at persuading voters to vote against one candidate or for another. John McCain was the target of attacks from issue advocacy groups in the 2000 presidential primaries, especially in South Carolina, and then later from a group named Republicans for Clean Air, which ran ads in three states criticizing his environmental record. The “group” was in fact two individuals from Texas.53 Following the 2000 primary cycle, Congress passed legislation that called for at least some reporting by such groups, a requirement absent in the 2000 election.54 The Bipartisan Campaign Reform Act sought to define electioneering communications more realistically as “any broadcast, cable or satellite communication that fulfills each of the following conditions: (1) The communication refers to a clearly identified candidate for federal office; (2) The communication is publicly distributed shortly before an election for the office that candidate is seeking; and (3) The communication is targeted to the relevant electorate.” “Shortly before” is defined as thirty days before a primary election and sixty days before a general election.55 That definition was initially upheld in McConnell v. Federal Election Commission (2003) but was subsequently challenged in an applied case, Federal Election Commission v. Wisconsin Right to Life (2007), as being too broad. Writing for the majority on a closely divided Supreme Court, Chief Justice John Roberts overturned the BCRA definition and provided yet another definition of electioneering communications: “A court should find that an ad is the functional equivalent of express advocacy only if the ad is susceptible to no reasonable interpretation other than as an appeal to vote for or against a specific candidate.”56 Beyond the content of issue ads, FEC v. Wisconsin Right to Life simultaneously allowed groups greater latitude in advocacy, including in the period directly before the primary and general elections, but the BCRA disclosure provisions as interpreted by the FEC remained in place. In chapter 2 Anthony Corrado explores this in greater detail, and in chapter 7 Allan Cigler describes the ruling’s effect on interest groups. An important outgrowth of the 2008 election is the litigation and eventual Supreme Court ruling in a case involving a documentary titled Hillary: The Movie. The film was shown in theaters in six cities and sold as a DVD.57 Citizens United, the group that produced the movie, “wanted to increase distribution by making it available through video-on-demand within the period before the 2008 primary when electioneering communications funded by general corporate or union money are prohibited.”58 Citizens

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United also wanted to avoid disclosing funding sources for its advertisements. The group made television ads promoting the movie and went to federal court challenging provisions in Austin v. Michigan State Chamber of Commerce, McConnell v. FEC, and the FEC’s application of the law.59 The Supreme Court’s decision, handed down more than a year after the 2008 election, is a major reversal of long-standing precedent. In a 5-4 decision, a closely divided Supreme Court declared prohibitions on electioneering communications by corporations unconstitutional.60 This ruling could have important implications for the financing of federal elections into the future. Ironically, a movie that had only limited viewership during the 2008 campaign spawned a ruling that could dramatically expand spending by corporations and unions in future federal elections. This decision is discussed in greater length in chapter 2.

Independent Expenditures Individuals and groups are allowed to spend unlimited sums of money independently of party committees and candidates. The court in Buckley v. Valeo stated that large independent expenditures did not “appear to pose dangers of real or apparent corruption comparable to those identified with large campaign contributions.”61 The right to independent expenditures was extended to political party committees in the 1996 election cycle.62 During the period of unconstrained electioneering through soft money and so-called issue advocacy, the use of independent expenditures was not as great. But in the post-BCRA world of campaign finance, especially for political party committees, independent expenditures have come to be an important part of the story. The use of independent expenditures by political party committees is explored in chapter 6, and by groups in chapter 7. As a result of Buckley v. Valeo and FEC v. Wisconsin Right to Life, the most important provisions of BCRA still in force are the party soft-money restrictions and the contribution limits for individuals and PACs. As described previously, the law did not lead to the demise of political parties. It has also not removed money from politics; rather, it has channeled fundraising efforts toward individual donors and away from other sources of money. It has not changed the tone of the campaigns. It remains true that party committees and interest groups generally mount more negative attacks than candidates do, but the overall tone of the 2004–08 campaigns was not markedly less negative than the tone of campaigns in 1996–2002 (see table 1-2).

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Table 1-2. Political Ads, by Type, 2004 and 2008 Federal Election Cycles Percent Contrast

Promote

Attack

2004 Candidate Party Coordinated Group Overall

25.9 24.4 42.7 14.2 26.3

52.9 8.6 14.4 7.5 31.1

21.2 67.0 42.8 78.3 42.6

2008 Candidate Party Coordinated Group Overall

16.5 28.2 20.7 11.4 17.4

57.5 1.2 3.5 22.8 46.9

26.0 70.6 75.8 65.8 35.6

Source: E-mail communication from Ken Goldstein, July 27, 2009.

Although part of the motivation for legislation passed in 2000 and reinforced in 2002 with BCRA was to stop groups from mounting anonymous attacks, the reality is that this mode of electioneering continues, though with somewhat better disclosure than before BCRA.63 The 2004 election saw visible and effective attacks from outside groups on both sides in the presidential race. Groups attacking Bush included the Media Fund and MoveOn.org. The attacks on Kerry came most notably from the Swift Boat Veterans and POWs for Truth.64 Less visible groups were still active in 2006.65 As discussed in chapter 7, the 2008 election did not see the same intensity of outside group activity, but that was probably because of the unusual circumstances of the 2008 election rather than a change in strategy by interest groups.

Financing the Most Expensive Election in U.S. History It has become a commonplace observation with each election cycle that more money was raised during the current cycle than in the prior cycle. But in the case of 2008, the increase was substantial and not isolated to presidential candidates. Figure 1-1 provides total spending by House, Senate, and presidential candidates for the post-FECA period (1976–2008) in 2008 dollars.

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Figure 1-1. Inflation-Adjusted Expenditures, 1976–2008 Congressional and Presidential Campaigns Millions of 2008 dollars 1,600 1,400 Presidential

1,200 1,000 800 House

600

Senate 400

06 20 08

20

02

04 20

20

98

96

94

92

90

88

00 20

19

19

19

19

19

19

84

86 19

19

80

82 19

19

78 19

19

76

200

Source: 1972–96 congressional data from John C. Green, ed., Financing the 1996 Election (Armonk, NY: M. E. Sharpe, 1999), p. 23; 1998 congressional data from FEC press release, April 4, 1999; 2000 congressional data from FEC press release, May 15, 2001; 2002 congressional data from FEC press release, June 18, 2003; 2004 congressional data from FEC press release, June 9, 2005; presidential data from the Center for Responsive Politics (www.opensecrets.org); 2006 congressional data from Bob Biersack, FEC deputy press officer, e-mail communication with Stephanie Curtis, July 3, 2007; 2008 data from FEC (www.fec.gov/press.shtml).

Spending Patterns Figure 1-1 shows a general trend toward increased spending over the period, peaking in presidential election years. However, it is also the case that the slope of increase rose substantially in 2008. Table 1-3 allows a more detailed understanding of how the 2008 elections compared with those of 2000 and 2004. Some of the entries in the table are incomplete. For example, the estimate of spending by Section 527 organizations in 2000 is incomplete because disclosure of spending was not required until July of that year. Similarly, the estimate for issue advocacy spending is based on data provided to the author by the Campaign Media Analysis Group. It does not include any estimate for spending on mail and telephone contact, voter mobilization, and the like.66 Our overall spending estimate of close to $6 billion in 2008 shows a more than 30 percent increase over 2004 spending, which in turn

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Table 1-3. Overall Spending, 2000–08 Federal Elections Millions of dollars

Presidential candidates a Congressional candidates b National parties (federal)c National parties (nonfederal)d State and local parties (federal)e State parties (nonfederal)f PACs g 527s 501(c)s Issue advocacy l Individual expenditures m Total

2000

2004

2008

645 978 544 498 171 330 320 101h 10j 248 4 3,849

958 1,099 1,214 ... 201 67 532 442i 60k ... 2 4,575

1,829 1,297 1,219 ... 318 94 767 258i 196k ... 2 5,980

Sources: Compiled from FEC data; Campaign Media Analysis Group data; Center for Responsive Politics data (www. opensecrets.org/527s/index.php and www.cfinst.org/pr/prRelease.aspx?ReleaseID=221). a. Includes all presidential election–related spending in prenomination, convention (including the convention grant and spending by host committees), bridge, and general election periods. Candidate transfers to party committees are deducted from the total to avoid double counting. b. Includes all spending by congressional candidates. Candidate transfers to party committees are deducted from the total to avoid double counting. c. Includes all spending by national party committees including independent expenditures and coordinated expenditures on behalf of candidates. Contributions to candidates are deducted from the total to avoid double counting. d. Transfers among party committees are deducted from total. e. Includes all spending by state and local party committees, including money contributed to candidates, independent expenditures, and coordinated expenditures on behalf of candidates. The national party transfers were deducted from the Democratic and Republican state and local party disbursements. f. Includes nonfederal (soft-money) share of state party expenses that must be paid with a mix of federal (hard) money and some soft money during election cycle. g. Total includes independent expenditures and internal communication costs made by PACs. PAC contributions to federal candidates are deducted from the total to avoid double counting. h. Major transfers removed. Estimate is much lower than the actual amount because 527 spending was only disclosed as of July 2000, owing to the adoption of the new disclosure law. i. Total includes spending by groups that were either thoroughly committed to federal elections or were heavily involved in federal elections but also doing substantial state and local work. Total includes electioneering communications made by 527 organizations. j. Total includes independent expenditures made by 501(c) groups. k. Total includes groups spending at least $200,000 and consists of independent expenditures, electioneering communications, and other expenditures (including internal communication costs) made by 501(c) groups. l. This money was spent on broadcast ads in the top seventy-five media markets between March 8 and November 7, 2000. This figure may include some money reported by parties, PACs, 527s, or 501(c) groups elsewhere in the table. m. Total includes independent expenditures made for or against candidates by individual donors.

exceeded spending in 2000 by 19 percent. The most pronounced increase in overall spending occurred in the presidential race, which accounted for more than half of the overall increase in the 2008 election cycle. Including all candidates for the presidency, spending in 2008 rose 91 percent over 2004 and 183 percent from 2000 to 2008. Some of the increase in spending between 2000 and 2004 can be explained by the higher BCRA

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individual contribution limits. But when figures are indexed for inflation, the BCRA limits rose by 15 percent between 2004 and 2008, while total spending rose by more than 30 percent. Moreover, PAC contribution limits were not changed by BCRA, yet PAC spending rose by 44 percent between 2004 and 2008. An even larger factor in the rise in individual contributions to the Democratic and Republican national committees in 2004 was the decision by both Bush and Kerry to accept public funding in the general election and encourage individuals to contribute to the national party committees rather than to their campaigns. This same approach was taken by McCain in 2008. Spending by congressional candidates in the aggregate also rose from 2000 to 2004 and then again in 2008. Comparing congressional elections over time is problematic because the set of states having Senate elections varies from cycle to cycle. That concern aside, the increase in the initial post-BCRA election (comparing 2000 with 2004) was 12 percent. Between 2004 and 2008 congressional candidate spending rose another 18 percent. These increases far exceeded the inflation-indexed BCRA increases in contribution limits. However, in 2008 spending by Senate candidates actually fell by $113.5 million from the 2006 midterm.67 The more comparable spending in House contests rose in 2008 over 2006 and 2004.68 For a complete picture of political parties’ fundraising over time, nonfederal soft money has to be added in with the federal hard money. The national party committees raised a combined $1.09 billion in hard and soft money in 2000. In 2004, without soft money as an option, the parties raised in the aggregate $1.23 billion, representing a 17 percent increase. In hard money alone, the national party committees saw a 115 percent increase between the $574.5 million they raised in 2000 and the $1.23 billion raised in 2004. Between the amount raised in 2004 and the $1.24 billion raised in 2008, the parties saw only a .5 percent increase, again all in hard money. Nevertheless, that the presidential candidates were spending 91 percent more than they had in 2004 makes even more impressive the parties’ ability to hold steady in hard dollars raised at $1.2 billion. Another large growth sector in federal elections has been political action committees. Limits for contributions to any particular PAC, unlike those to the candidates and party committees, were not increased by BCRA. Limits on individuals’ aggregate contributions to PACs were increased by BCRA just as the overall individual aggregate limits were raised and indexed to inflation. PACs saw a 66 percent spending increase between 2000 and 2004 and another 44 percent increase between 2004

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and 2008. As discussed in greater detail in chapter 7, interest groups not only make PAC contributions to candidates and party committees, but they also make independent expenditures and are otherwise involved in contributing to groups organized under Sections 527 and 501(c) of the Internal Revenue Code. As noted, the estimates for 2000 are imprecise because reporting requirements for some activities were limited. But in that cycle, groups spent at least $359 million beyond their PAC spending. The 2004 cycle saw a substantial amount of 527 activity ($442 million). Interest groups remained important to federal contests, as they had in the 1996, 2000, and 2004 elections, but in different ways. Spending by 527 organizations was less in 2008 ($258 million) than in 2004. However, 501(c)s spent more, disbursing $196 million in 2008 as compared with $60 million in 2004. One way to examine the interest group sector is to combine spending from PACs, 527s, and 501(c)s with the issue advocacy estimate for 2000 into an aggregate figure for interest group spending. Interest groups as a whole spent $679 million in 2000, $1.034 billion in 2004, and $1.221 billion in 2008. Overall, then, interest groups spent more in 2008 than in 2004 or 2000. This may be a surprise to some because in 2008 the more visible Section 527 groups spent less. Interest groups in the aggregate spent 52 percent more in 2004 than in 2000 (though 2000 figures are most likely underestimated because of incomplete reporting by 527 organizations and the difficulty of tracking issue advocacy ads).69 Between 2004 and 2008, when there was more complete reporting, there was an overall increase in spending by interest groups of 18 percent. Another important finding shown in table 1-3 is the relative balance between parties and interest groups in the system of contemporary campaign finance. In 2008 political parties spent $1.537 billion on federal-level elections or only about $300 million more than interest groups ($1.221 billion). Candidates exceeded political parties and interest groups, spending $3.13 billion. Another way to look at these data, however, is to say that interest groups and parties together spent $2.76 billion—or about 46 percent of all spending, compared with about 52 percent by candidates. The remaining spending came from state parties for nonfederal campaigns and individual independent expenditures. This shows that to understand the financing of the American federal-level elections requires a careful assessment of how candidates, political parties, and interest groups raise and spend money.

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The Campaign Finance Coalitions In raising and spending money in American electoral campaigns, the two sides consist of the candidates, their political party committees, allied interest groups, and individuals. As noted, candidates in the 2008 presidential race were not only the most visible but were also predominant in the raising and spending of money. That was especially the case for Barack Obama, who by declining public financing was able to better control his team’s message than had he relied more on the DNC and allied groups, as had John Kerry and George Bush in 2004 and John McCain in 2008. From the perspective of the voter, however, the party, the candidate, and group campaigns are often indistinguishable.70 databases and microtargeting. Candidates have long been the beneficiaries of efforts by allied groups and party committees in registering and mobilizing voters. Before passage of BCRA this was one of the ways party soft money was spent. Both parties have long maintained data files of registered voters at the state and national levels. Republicans had the advantage in 2004 in the use of voter databases and sophisticated statistical modeling using large survey samples to identify persuadable voters and those with a high propensity to vote for a particular candidate. This methodology came to be called microtargeting. Bush, using a group named TargetPoint and the RNC’s large Voter Vault database, outperformed Kerry, America Votes, and the DNC in this critical area.71 The DNC also has its own database of voters, something called Demzilla in the 2004 campaign. While not as advanced or complete as the Republicans’ database, Demzilla was expanded and improved in 2008. This happened, in part, as a result of DNC chair Howard Dean’s fiftystate campaign strategy, which deployed national committee staff to all fifty states. Data enhancement was one part of this expanded outreach. The Democrats added VoteBuilder in 2008, a software program used to update and refine the voter list. Democratic allies also acted to help the Democrats close the gaps in microtargeting and list development. Smarting from the Democrats’ 2004 defeat, Harold Ickes organized a group of investors to fund a group to counter the Republican advantage in building a list and statistical modeling. The investors formed Catalist, a limited liability corporation. By 2008 the Catalist list of voters rivaled the RNC’s Voter Vault in size, approximately 220 million voters. The list has address, party registration, vote history (whether a person has voted in past general and primary elections),

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and as much as can be discovered from public sources about voters’ gender, age, race, phone number, e-mail address, automobile registration, gun registration, and hunting and fishing licenses as well as a range of consumer information that can be purchased from marketing firms like newspaper, magazine, and cable television subscription lists. Unlike the Voter Vault, which cannot legally accept information from groups, Catalist can and does obtain membership information from Democratic-leaning interest groups. Among the investors in Catalist are labor unions, teachers organizations, trial lawyers, and environmental and prochoice groups, all of whom match up their lists with Catalist. As the campaign proceeded, the file was updated with information on change of address and the results of voter canvass or other activity. Among those that purchased access to the Catalist list were the campaigns of Hillary Clinton and Barack Obama, the Democratic Senatorial Campaign Committee, the Democratic Congressional Campaign Committee, the America Votes Coalition, the Service Employees International Union, the AFL-CIO, and the Sierra Club.72 Beyond Catalist the progressive side in 2008 used a new data management tool called the Voter Activation Network (VAN). This software allows campaigns to integrate volunteer, donor, and membership data with voter contacts through canvassing and other means and to microtarget voters in a technologically savvy and efficient manner. During the 2008 election the Obama campaign used VAN extensively as an active interface to mobilize voters and volunteers.73 The RNC and McCain campaign used a similar method and built on the success of the Bush and RNC campaign in 2004. In addition to TargetPoint, the Republicans used a second firm, Grassroots Targeting, headed by Blaise Hazelwood, who had directed the 72-Hour Task Force get-out-the-vote effort for the RNC in 2004 and 2006. Michael Myers of TargetPoint Consulting said, “Being able to use the past work and keep building on that is a big advantage and helps us out a lot.”74 presidential fundraising partnerships. One of the most important teammates for a presidential candidate is the national party committee. This has been especially the case for candidates who accept public funding. During much of the nomination phase of a presidential election the focus is heavily on the candidates and their fundraising. But once the nominee is known, the party committees become more central to the overall funding strategy of the candidates. Perhaps because of Obama’s success in raising money from individuals, McCain often is discounted as a fundraiser. In fact, the McCain-RNC combined fundraising in 2008

100

Bush/RNC (2003–04)

McCain/RNC (2007–08)

Obama/DNC (2007–08)

Kerry/DNC (2003–04)

Source: FEC records of individual contributions, downloaded March 3, 2009 (ftp://ftp.fec.gov/FEC/). a. The vertical line near the beginning of September 2008 indicates the approximate date of the national party conventions.

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200

300

400

500

Millions of dollars

Figure 1-2. Cumulative Itemized Receipts from Individuals to Presidential Nominees and National Party Committees, 2004 and 2008 Federal Electionsa

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Jan 1 Jan 29 Fe b2 M 6 ar 2 Ap 6 r2 3 M ay 21 Jun 18 Jul 1 Au 6 g1 3 Sep 10 Oc t8 No v5 De c De 3 c3 1 Jan 28 Fe b2 M 5 ar 2 Ap 4 r2 1 M ay 19 Jun 16 Jul 1 Au 4 g1 1 Sep 8 Oc t6 No v 3 De c De 1 c2 9

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substantially surpassed the Bush-RNC fundraising in 2004, and Bush had the advantages of the incumbency in raising money in 2004, something McCain lacked in 2008. It is interesting to contrast the Bush-RNC and Obama-DNC lines in figure 1-2. For the period from July of the off-year (2003 or 2007) until July–September of the election year, the Bush-RNC campaign raised more money than the Obama-DNC team. After that, the Bush-RNC fundraising line continues to climb at a steady rate while the Obama-DNC slope rises much more. Obama’s money advantage, apparent by the spring of 2007, impacted all aspects of the campaign. Perhaps the most visible effect was Obama’s expansive television, radio, and Internet campaign. Obama ran more ads on network television than had any campaign in decades, even having a thirty-minute commercial that ran in primetime slots on CBS and NBC networks. Obama also made more extensive use of radio than did McCain. In North Carolina, for example, the Obama campaign outspent the McCain campaign, $250,000 compared with $40,000, in radio ads.75 Perhaps more important, Obama had control over his television advertising message. This was something McCain did not have in his joint McCain-RNC ads. Evan Tracey, of the Campaign Media Analysis Group, observed that both the number and content of ads matter: “Tonnage works, and we see that all the time,” but “message control is more important sometimes than message tonnage.”76 In 2008 Obama had both. While outspending McCain three-to-one on television advertising, Obama also mounted a large-scale ground operation.77 In 2004 Kerry and the DNC essentially left the ground game to allied groups, including organized labor, environmental and prochoice groups, and especially a Section 527 group named America Coming Together.78 That year America Coming Together and America Votes, which coordinated the ground activity of pro-Democratic interest groups, spent a combined $81.6 million.79 Major donors to America Coming Together and related groups like America Votes and the Media Fund (which ran television ads critical of Bush) included philanthropist George Soros, Progressive Corporation insurance firm chair Peter Lewis, and Hollywood executive Steven Bing.80 America Coming Together exceeded its ambitious goals for voter registration and turnout but failed to match the success of the RNC’s 72-Hour Task Force in getting voters to the polls. In 2008 Obama’s game plan was to run the ground game himself, applying some of the principles he had learned as a community organizer. The system relied on a large number of dispersed field offices staffed by

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employees who, in turn, relied on volunteers. The offices had a common look and feel. The space was often more Spartan, compared with McCain field offices, but with hand-painted signs and a buzz of excitement. Overall Obama had 770 offices compared with McCain’s 370.81 The difference in offices and paid staff varied a bit by state, but in a sample of five battleground states Obama had on average twenty-seven more field offices in each state than McCain.82 One marker of success in the field is new voter registration. The political scientist Dennis Johnson has observed that in a group of twelve key states, the voter rolls “expanded by about 4 million persons,” with Democrats adding in Florida “twice the number of new voters as Republicans; in Colorado and Nevada, the ratio is four-to-one and in North Carolina, it was six-to-one.”83 Obama’s operation was consistently conscious of tracking individual preferences and levels of interest. People who attended Obama events were invited to fill out a card with information that allowed the campaign to communicate with them. The millions of people who went to the Obama website were invited to do the same. Individuals were invited to set up their own social network with the campaign through a website named My.BarackObama.com, or MyBO. Dennis Johnson reports on the metrics: “The more than 2 million persons who had logged onto MyBO could form their own groups and communities, blog (400,000 blog postings), set fundraising plans ($30 million raised from 70,000 people), volunteer (35,000 volunteer groups were created), host events (200,000 offline events). By Election Day, Obama ‘knew’ more than 7 million supporters through social network and campaign website operations.”84 In addition, Obama had 2.2 million Facebook supporters and 800,000 followers on MySpace. Whereas campaigns typically seek out individuals or communicate with people without knowing much about their preferences, tools like MyBO and the campaign’s voter file allowed the campaign to broaden its reach and tailor its message. Again from Johnson: “The Obama campaign took great strides in making it an intimate campaign, between Obama himself, his closest aides, volunteers, and individuals.”85 Seen by observers as key to his early success in Iowa, Obama’s database and tracking tools helped the campaign mobilize voters for caucuses and primaries and then for early voting and absentee voting in the general election.86 Individuals were organized to call voters in their own state or, if their state was not competitive, to call voters in nearby states that were.

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All of this happened on a scale not seen before in American electoral politics. It also was not cheap. Without the money advantage the Obama campaign had, the scale could not have been as great. But participants in the Obama campaign did not get the impression the campaign was flush. At the field offices, volunteers used their own cell phones if they had free minutes, then they used inexpensive Cricket phones, and then they used the landlines. Obama offices charged individuals for bumper stickers and lawn signs, again reinforcing the sense of people pitching in. Aided by Obama’s momentum and undoubtedly by his ground efforts as well, Democratic congressional candidates did exceptionally well in 2008. The resource advantage of the party congressional committees that supported them is also part of the story. One important point of coordination among team players in recent elections has been in collecting information on potential donors, voters, and volunteers. Although it is against the law for interest groups to formally join with party or candidate committees, a degree of cooperation among candidates and their party committees is allowed, particularly in research and get-out-the-vote efforts. In addition, PACs and other groups with complementary agendas are free to form alliances—a flexibility that has proved invaluable to the Democratic team, which has more interest group players, such as unions and environmental groups. The net effect of the advances made by both sides was that 2008 was the most database-driven campaign to date. Both sides invested heavily in modeling voter preferences and in microtargeting appeals. Brian Wolff of the Democratic Congressional Campaign Committee, when asked about the importance of microtargeting, said, “It was the be-all, end-all of what we were doing.”87 Overall, the Democratic team’s effort in microtargeting and get-out-the-vote proved more effective, with some of the success attributable to Obama’s own efforts, which were financed through his campaign.88 congressional campaign committees. Beyond the core party functions of providing infrastructure like voter lists and research on candidates and the opposition, party committees help fund campaigns. They do this through contributions to candidates and by spending in coordination with candidates. Both of these types of spending are limited. Before BCRA, party committees spent heavily on campaigns through soft money. Now that soft money is largely banned, party committees spend heavily on particular races through independent expenditures. As a result

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of a Supreme Court ruling in a case brought by the Colorado Republican Federal Campaign Committee, the party committees can spend unlimited amounts of hard money independently. As hard-money contributions to the party committees rose following BCRA passage, much of that money has been spent in particular contests. The party committees spent heavily in competitive contests in 2008. Overall, the two parties spent more than $353 million in independent expenditures in 2007–08, most of which went to congressional races. For example, the Roger Wicker (Republican) versus Ronnie Musgrove (Democrat) Senate race in Mississippi saw the most party independent expenditures, totaling more than $20.4 million. The ratio of spending was about two-to-one in favor of those trying to help Musgrove. The dynamic of party independent expenditures is discussed in greater detail in chapter 6. interest groups. Political action committees are one way interest groups seek to influence the outcome of federal elections. As table 1-3 summarizes, PAC activity was up substantially in 2007–08, more than double their spending in the last pre-BCRA presidential election (in 2000). As discussed in chapter 7, PACs allocate their funds disproportionately to incumbents. In 2008 that remained the case: PACs contributed $304.7 million to presidential and congressional incumbents. In comparison, they contributed only $48.7 million to challengers and $32.4 million to open-seat candidates. They spent $134.7 million in independent expenditures in the 2008 elections, of which $84.9 million was spent on behalf of favored candidates and $49.8 million against opposing candidates.89 As noted, in 2008 there was less spending by Section 527 organizations and more spending by 501(c) organizations; including PAC spending, interest groups overall spent more in 2008 than in 2004 or 2000. The reality that interest groups were more active in 2008 may have been overlooked because there was not an attention-getting group that successfully attacked a candidate as was seen in 2000 and 2004. For example, in 2004 a group named Swift Boat Veterans and POWs for Truth ran ads and sent mail attacking Democratic nominee John Kerry’s war record, honor, leadership, and participation in Vietnam War protests; these efforts effectively portrayed the idea that “if Kerry can’t fight for his honor, how will he fight for security.”90 The ads, which went unanswered by the Kerry campaign for two weeks, are widely seen as having hurt the Kerry candidacy. Throughout much of the 2008 campaign observers anticipated a Swift Boat–type attack. Some efforts in this direction came now and then but not in a sustained way that generated the same kind of attention. The 2004

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campaign also saw a positive ad from a Section 527 organization named Progress for America, which ran an ad thanking President Bush for protecting America. The tone and content of the ad would have been roundly criticized if the ad had come from the Bush campaign, but coming from an outside group it delivered a positive, patriotic message intended to help Bush. We did not see ads of this type on a large scale in 2008. Interest groups, especially pro-Republican ones, directed a lot of their attention in 2008 to U.S. Senate races (see chapter 7). This was the result of a perception, reinforced by the Democratic Senatorial Campaign Committee, that the Democrats had the potential to reach the critical sixty votes in the U.S. Senate. In some states like Colorado, five different groups spent as much as $1 million each against the Democratic candidate Mark Udall, in hopes of holding what had been a Republican seat. Udall won with 52.8 percent of the vote. Business and labor groups were also fighting each other over the airwaves more directly than is often the case. In 2008 a major focus was the Employee Free Choice Act. The Chamber of Commerce spent $30 million opposing unions’ efforts to allow unions to be recognized with a majority of workers’ signatures on a public card instead of requiring a secret ballot election.91 Unions also invested heavily in advertising and memberto-member communications on the issue. In the end, some Chamber of Commerce–backed Senate candidates, like Elizabeth Dole in North Carolina and John Sununu in New Hampshire, lost, while others the Chamber supported, like Susan Collins in Maine, won. This sets the stage for a legislative fight on this issue and highlights the central role the Chamber now plays among the groups typically supporting Republicans.92

Raising the Money Money to finance federal elections comes from three sources: individuals; party committees; and interest groups, which are themselves often aggregations of individual contributors. Individuals may contribute to candidates, party committees, and interest groups and may spend money independently. Candidates making contributions are sometimes treated like other individuals and in other respects are treated differently.93 Money is raised by candidates, party committees, and interest groups at events, through appeals to individuals sent through the mail, on the phone, in person, and increasingly in 2008 through appeals sent by e-mail. Candidates are not above giving their website in debates, and it is now a staple in

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paid advertising for the candidate to urge people to go to the website and contribute to the campaign. Even more than congressional candidates, presidential candidates turn to individuals to finance their campaigns. Candidates exploit their personal networks of individual donors and seek endorsements from others willing to share contacts. Political action committees have typically focused much more on congressional than presidential elections. Some candidates, like Barack Obama in 2008, have made a point of not accepting any PAC contributions. When fundraising by all presidential candidates is combined, individuals provided 80 percent of all receipts in 2007–08, PACs provided 3 percent, party committees 2 percent, and candidates’ contributions or loans to their campaigns, 9 percent. This pattern is similar to 2004, except that the share of funding coming from individuals was less in 2004 (70 percent). Congressional candidates also raise most of their money from individuals, but the proportions vary by candidate type—incumbents, challengers, and open-seat candidates. In 2007–08, repeating a long-standing pattern, House candidates relied less on individual donors than did Senate candidates. Compared with recent congressional elections, PACs played a larger role. Even so, more than half of all the money raised by House incumbents came from individuals (51 percent), and open-seat candidates and challengers raised proportionately more from individuals, as well. Personal relationships between the donor and the person asking for the money are considered a key to successful fundraising. Individuals who successfully tap their personal networks for a candidate or party committee are called “bundlers.” Some past presidential campaigns have set thresholds for bundlers to aim for. For example, Senator Clinton’s campaign had a group called Hillraisers—people who had raised $100,000 from individuals. For Senator McCain, the elite groups of bundlers were known as Trailblazers, who raised $100,000, and Innovators, who raised $250,000. Bundling is an especially important mode of fundraising for individuals making large contributions. A smaller form of bundling, microbundling, arose on the Internet in 2008. Campaigns like those of Mitt Romney, Ron Paul, and Barack Obama encouraged supporters to use the Internet to invite friends and others to contribute. This is discussed in greater detail in chapter 3.

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The expanded use of the Internet in fundraising was clearly one of the most important developments in campaign finance in 2007–08. Paul raised more than $17 million from small individual contributions of $200 or less in 2007. This was 61 percent of his 2007 fundraising. But Paul’s early success among small donors pales in comparison with that of Obama, who, as one observer put it, “raised more from small individual contributions in 2007 than Bill Bradley or Al Gore had raised from individuals contributing at any level in 1999 or John Edwards or John Kerry had raised from individuals contributing at any level in 2003.”94 Moreover, the Obama campaign saw financial contributions as but one means of involving and empowering volunteers in the nomination and general election phases.95 Individual donors whose aggregate contributions to a single candidate or group fall below the $200 threshold are not disclosed by name and address in the FEC database. Contributions from these individuals are described in summary reports as unitemized contributions. Figure 1-3 plots the percentage of contributions of less than $200 coming from contributors who gave more than $200 in the aggregate to John McCain and Barack Obama over the 2007–08 election cycle. While candidates, party committees, and PACs ensure compliance with FEC reporting requirements by tracking small individual contributions— to differentiate between itemized and unitemized donations—once a donor exceeds the $200 threshold, additional contributions are reported to the FEC. The exception to this is presidential candidates who report contributions of less than $200 as a condition of claiming matching funds. While the Obama campaign is seen as having substantially benefited from small individual contributions, it was large donors who were critical in the early going. Richard Wolffe describes the donation process: Contrary to their own carefully cultivated image, the money did not grow at the grass roots. “It wasn’t the Internet,“ said [Penny] Pritzker [the national finance chair for the Obama campaign]. “We tapped everybody and did every event we could. He’d do seven events in New York, back-to-back-to-back-to-back.” Internet donations totaled less than 15 percent of Obama’s fund-raising through 2007. Money only started to cascade through the Web after Iowa in early January 2008, and it would take another several months, as the primaries dragged on, for the grass roots to represent half the campaign’s fund-raising.96

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Figure 1-3. Unitemized Contributions to Presidential Candidates as Share of Total Contributions, 2007–08 Percent unitemized 0.40

Obama

0.35 0.30 0.25 McCain 0.20 0.15 0.10

ov

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Source: Bob Biersack, FEC deputy press officer, e-mail communication with David Magleby, March 4, 2009.

Obama’s success is thus attributable to his success with donors at all giving levels. As is evident from figure 1-3, in proportionate terms Obama’s unitemized contributions started out substantially ahead of McCain’s and had an upward trajectory in the share of his total receipts through his securing the Democratic nomination in June 2008. During the most intensely fought part of the nomination campaign, more than 40 percent of Obama’s overall fundraising total came from small individual donations.97 Once Obama was the presumed nominee, contributions from fence-sitting donors came in with larger dollar contributions. The pattern for McCain is the opposite; his unitemized contributions as a share of all contributions increased in March 2008 soon after he became the presumed nominee, and at one point in the summer McCain and Obama were at near parity in the percentage of small contributions from donors on a monthly basis. Because Obama had many more donors, his money raised from small donations always surpassed McCain’s. Both can-

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Table 1-4. Number of Reported Contributions in Presidential Election Years Year

Total number of contributions

1984 1988 1992 1996 2000 2004 2008

244,645 407,823 835,718 1,146,494 1,569,508 2,376,404 3,108,886

Year

Total number of contributions

1986 1990 1994 1998 2002 2006

255,601 511,629 789,288 937,120 1,293,128 1,701,993

Source: Compiled from FEC data.

didates had another increase in unitemized contributions in the September–October period, but by this time the Obama campaign was again far outpacing McCain among donors of small contributions. Of course, small donors in this period, when McCain had otherwise stopped raising money, were mostly donors to joint McCain-RNC “victory” committees. Individual contributions of less than $200 represented just over 40 percent of all individual contributions to presidential candidates in 2008. For U.S. House candidates they were 20 percent, and for U.S. Senate candidates, 22 percent, of the total. Contributions to House candidates of less than $200 were slightly less likely to be given to incumbents (47 percent) than were contributions of more than $200 (54 percent). Contributions to House Democrats of $200 or less (58 percent) were more likely to be made than contributions above this threshold (56 percent). Contributions to Senate candidates of less than $200 were more likely to be made to Democrats (61 percent). Among those giving $200 or less, Democratic challengers did better than Democratic incumbents. Tracking the total of an individual’s contributions to various candidates, political party committees, and interest groups is difficult because data are reported to the FEC as separate contributions rather than aggregations of all contributions an individual has made. One measure of activity is to simply track the number of reported contributions over time from individuals who have exceeded the $200 reporting threshold. When we do that we find a general upward trend in numbers of contributions in presidential election years from 1996 through 2008. The number of reported contributions since 1984 are presented in table 1-4.

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Scholars who have wanted to link contributing money to other attitudes and behaviors have included items in surveys on the topic. On this form of participation, as with turnout and other forms of participation as well, substantial overreporting is assumed. The American National Election Study (ANES) has asked respondents in presidential elections since 1952 the following question: “During an election year people are often asked to make a contribution to support campaigns. Did you give money to an individual candidate running for public office?”98 The self-reported proportion making a contribution to candidates or parties at any level ranges from 4 percent in 1952 to 16 percent in 2004. In 2008 the proportion of respondents who reported having made contributions was 14 percent.99 The mean level of respondents reporting they had made a contribution through the 2004 election cycle was 9 percent. A Gallup poll included similarly worded questions in 1956, 1960, 1964, and 1976. The responses in those polls varied from ANES’s responses for these four election cycles by an average of less than 1 percentage point. There are some patterns in the survey responses. For example, 8–12 percent reported having made a contribution in the 1956–76 elections. Then from 1980 through 1996, the proportions drop to between 6 and 10 percent.100 Political party committees raised and spent record-setting amounts of money in 2007–08 (see figure 1-4). Party committees raise money from four sources: individuals, PACs, candidates, and transfers from other state or national party committees. In the last three presidential elections, the DNC and RNC have consistently raised between 88 and 91 percent of their funds from individuals. Congressional campaign committees get more money from individuals than from any other source but turn more to PACs and contributions from candidates than do the RNC and DNC. Candidate contributions to House and Senate campaign committees typically take the form of unlimited transfers from their own campaign committee accounts. Recently, candidate contributions to the House campaign committees and the Democratic Senatorial Campaign Committee have amounted to 10 percent or more of all committee receipts and reached a high of 27 percent of the latter committee’s receipts in 2008. In 2008 Democrats received more in contributions from all individual donors giving to candidates and political party committees (56 percent for Democrats compared with 44 percent for Republicans). The partisan advantage Democrats had among individual donors was even greater among donors giving at or near the maximum allowable contribution of

50

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$108,200 (61 percent for Democrats compared with 35 percent for Republicans).101 One other contrast between the parties is noteworthy here. The Democrats have done much better than the Republicans in getting members to give to the congressional campaign committees. In 2008 Democratic members gave the Democratic Senatorial Campaign Committee $20.6 million compared with the National Republican Senatorial Committee’s receipts of $2.8 million. The Republican committee chair and Nevada senator John Ensign said his committee needed “a lot more help from colleagues.”102 Party committees generally get off to a slower start in fundraising than do the candidates. This is a result of the donors’ focus in the early months of the cycle on the candidates and not so much on the political party committees. Figure 1-5 plots party committee receipts by reporting period for the 2007–08 cycle. The RNC saw a substantial increase in receipts in the June 30, 2008, FEC report and an even more substantial rise in the October 15 report. The McCain campaign, like the Bush campaign of 2004, made a concerted effort to urge individuals to donate to the RNC. The DNC saw a similar increase in its receipts in 2004. But in 2008, with Barack Obama able to continue to raise money as a candidate, the DNC did not see the increase it had in 2004 or that the Republicans saw in 2004 and 2008. The Democratic congressional campaign committees found themselves in the unusual position of outpacing the Republicans. Note the steeper rise in receipts for them in the June–October period and even more in the October–November period. Even though the Republicans were facing a possible sixty-seat Democratic majority, the flow of money to the National Republican Senatorial Committee did not keep pace with the Democratic Senatorial Campaign Committee.

Overview of the Book Our analysis of campaign finance in the 2008 federal elections draws heavily from Federal Election Commission data as well as data from the Internal Revenue Service and other agencies. We also draw on various independent research projects by our authors, all experts in the subjects of their chapters. One project we draw from substantially was a study funded by the Pew Charitable Trusts to examine a sample of battleground states. For that study I conducted more than 200 interviews in Washing-

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Figure 1-5. Hard-Money Receipts to National Party Committees, 2008 Election Cycle a Dollars in millions DNC DSCC DCCC

400 350

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c0 De 31

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Source: Federal Election Commission (http://fec.gov/press/press2008/2008NewsReleases.shtml), January 19, 2009; November 24, 2008, data from Bob Biersack, deputy press officer, Federal Election Commission, e-mail communication with Stephanie Curtis, January 13, 2009; December 31, 2008, data from Bob Biersack, FEC deputy press officer, e-mail communication with Stephanie Curtis, February 19, 2009. a. Data from January 1, 2007, through each date listed.

ton or in one of the battleground states. They were all conducted on the record, and most were digitally recorded. We express appreciation to those interviewed for making time available for us to learn from them. We also express appreciation to the academics who conducted the studies of the battleground states for their collection of data on voter contacting by mail, in person, through the Internet, and in other ways. Chapter 2 of this volume examines the regulatory environment of the 2008 election. Even though this was the second presidential election conducted under the provisions of BCRA, the implementation of the new law continued to be a matter of great controversy. As mentioned earlier, between 2004 and 2008 there were two U.S. Supreme Court rulings striking down provisions of BCRA, and other cases were pending. Key issues

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concerning the implementation of BCRA’s statutory provisions were also being decided at the FEC, including a number of regulatory questions that were first raised before the 2004 election. The resolution of these matters was complicated by the fact that the FEC was left powerless throughout much of the election cycle, owing to unfilled vacancies on the commission. The FEC’s inactions, as well as its rulings, influenced the financial activities that took place in 2008. Anthony Corrado reviews the legal and regulatory decisions made during this election cycle, their implications with respect to the efficacy of the law, and the issues that remain unresolved with respect to the financing of federal elections. In chapter 3, John Green and Diana Kingsbury analyze the financing of the 2008 presidential nomination. With no incumbent president or vice president running, the interest and attention given to the race was high. Continuing a trend toward front-loading, two states defied the Democratic Party and held contests earlier than party rules permitted. Of central importance to the financing of 2008 was the protracted battle for the Democratic nomination. What did this do to candidate fundraising strategy? How did it impact McCain, who secured his nomination months before Obama did? What lessons will candidates learn from this for future nomination fundraising strategy? And the question that may be of most relevance: Is the FECA system of public matching funds dead? The financing of the presidential general election is the subject of chapter 4. Anthony Corrado discusses the first contest to feature a nominee who did not accept public funds and describes the ways candidates and political committees raised and spent money in this context. In particular, he examines the strategic implications of Obama’s decision and the tactics used by the McCain campaign to try to remain financially competitive. His analysis highlights the complexities of general election funding and the advantages Obama gained as a result of his financial strength. In doing so, he identifies the challenges facing the public funding system as a result of the 2008 experience. While the presidential contest was the most visible element of the 2008 federal elections, congressional elections had their own dynamics in financing and electioneering. Republicans were fighting to limit their seat losses in hopes of denying Democrats sixty Senate seats, while Democrats felt emboldened by their victories in the 2006 midterm elections and by a set of Republican retirements that led to contested primaries, some of which, like New Mexico’s, were so intense that they hampered the Re-

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publican candidates’ general election chances. In the House the Democrats were also flush from regaining the majority in 2006 and hoped to build on that success in 2008. While Bush was not on the ballot in 2008, voters in battleground House and Senate races might have assumed he was, given the intensity of the Democrats’ effort to tie Republicans running in 2008 to Bush and his policies. Party committees played a large role in some Senate and House races, spending more independently than the candidates spent. Paul Herrnson and Stephanie Perry Curtis examine these dynamics of congressional campaign finance in chapter 5. In chapter 6 I explore the role of party committees in 2008. The two most important remaining provisions of BCRA are the increases in individual contribution limits and the party soft-money ban. As noted, the party committees have quickly substituted hard money for soft money. How have they done this in so short a time? What are the implications of a large party presence in competitive elections? Is the ascendancy of the Democrats likely to endure? Can the National Republican Campaign Committee come back? Interest groups surprised many observers in 2008. As noted, there was less 527 organization activity but much more 501(c) and PAC spending. Was this a function of the candidates and issues of 2008, or is this likely something that will be repeated? Alan Cigler, an expert in interest groups, addresses this question in chapter 7. He assesses the difference PACs made in 2008 and explores whether increased PAC activity is a mode of participation in lieu of 527 and 501(c) spending. More broadly, 2008 saw a decline in Republican ally involvement, especially at the end of the campaign, and a substantial effort by labor unions, especially the Service Employees International Union, in independent expenditure and 527 activities. In chapter 8, our concluding chapter, Thomas Mann revisits several themes of this chapter. Having now had two presidential elections under BCRA, what can we conclude about the impact of the legislation? Is the system of campaign finance in 2008 preferable to the one in place in 2000? How could it be improved?

Notes 1. Stuart Rothenberg, “Have Republicans Found Their Floor in the House with 178?” Real Clear Politics, March 3, 2009 (www.realclearpolitics.com/articles/ 2009/03/have_republicans_found_their_f.html [November 2009]).

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2. John Whitesides, “Wall Street Crisis Refocuses U.S. Election,” Reuters, September 17, 2008 (www.reuters.com/article/idUSN1725930620080917 [January 2010]). 3. David Plouffe, The Audacity to Win: The Inside Story and Lessons of Barack Obama’s Historic Victory (New York: Viking, 2009), pp. 339–40. 4. Quoted in Glen Johnson, “McCain: Wall Street Woes Point to Regulation Need,” Real Clear Politics, September 15, 2008 (www.real clearpolitics.com/ news/ ap/politics/2008/Sep/15/mccain__wall_street_woes_point_to_regulation_need. html). 5. John Zarrella and Patrick Oppmann, “Florida, Michigan Seek Exit from Penalty Box,” Politics, CNN, March 6, 2008 (www.cnn.com/2008/POLITICS/03/ 06/florida.michigan/index.html [June 2009]). 6. The RNC spent an estimated $103 million in direct involvement with the McCain campaign. If only receipts are considered, and McCain’s unspent GELAC funds are left out of the equation (see chapter 4), Obama’s spending surpassed McCain’s by $112 million. 7. The Cook Political Report lists the numbers of competitive contests since 1992 as follows: 1992, 151; 1994, 136; 1996, 119; 1998, 62; 2000, 45; 2002, 44; 2004, 35; 2006, 52; 2008, 55 (http://cookpolitical.com/node/7695; http://cook political.com/node/9941). See also Charlie Cook, “National Overview,” Cook Political Report, October 4, 2002, p. 6. 8. Dennis W. Johnson, Routledge Handbook of Political Management (New York: Taylor and Francis, 2008). 9. Michael J. Malbin and others, “New Interest Group Strategies—A Preview of Post McCain-Feingold Politics?” Campaign Finance Institute, 2002 (www.cf inst.org/books_reports/pdf/int_groups_CFIpaper.pdf), p. 27. 10. Chris Cillizza, “Democrats Losing Race for Funds under Dean,” Washington Post, November 12, 2005 (www.washingtonpost.com/wp-dyn/content/ article/2005/11/11/AR2005111101833_pf.html [August 2009]). 11. Andrew Rasiej, editor of TechPresident blog, quoted in Lea Winerman, “Candidates Find Top Dollars in Bottom-up Online Campaigns,” NewsHour, Public Broadcasting Service, July 19, 2007 (www.pbs.org/newshour/vote2008/ july-dec07/internet_fundraising_7-19.html [July 2009]). 12. Joe Trippi, phone interview by David Magleby, December 18, 2008. 13. Jon Carson, interview by David Magleby, Washington, DC, December 11, 2008. 14. Christopher Stern, “Obama’s Donor List Is Powerful Political Tool,” New York Sun, April 29, 2008 (www.nysun.com/national/obamas-donor-list-ispowerful-political-tool/75451/ [October 2009]). 15. Ari Melber, “Obama Casts a Wide Net,” Opinion, CBS News, January 13, 2008 (www.cbsnews.com/stories/2008/01/11/opinion/main3703275.shtml [August 2009]); Howard Kurtz, “It’s All Uphill from Here,” Washington Post, Febru-

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ary 18, 2008 (www.washingtonpost.com/wp-dyn/content/article/2008/02/17/AR 2008021702453.html [August 2009]). 16. Dennis W. Johnson, “An Election Like No Other?” in Campaigning for President 2008: Strategy and Tactics, New Voices and New Techniques, edited by Dennis W. Johnson (New York: Routledge, 2009), p. 13. See also Howard Fineman, “What Have We Created?” Newsweek, November 3, 2008, p. 54; Jose Antonio Vargas, “Obama Raised Half a Billion Online,” Washington Post, November 20, 2008 (voices.washingtonpost.com/44/2008/11/20/obama_raised_ half_a_billion_on.html [September 2009]). 17. Greg Allen, “Palin, Other GOP Governors Vie for 2012 Spotlight,” All Things Considered, National Public Radio, November 13, 2008 (www.npr.org/ templates/story/story.php?storyId=96970051 [August 2009]); Peter Overby, “Obama’s Network of Campaign Supporters Lives On,” All Things Considered, National Public Radio, January 25, 2009 (www.npr.org/templates/story/story. php?storyId=99804285 [August 2009]). 18. For example, Buckley v. Valeo, 424 U.S. 1 (1976); McConnell v. Federal Election Commission, 540 U.S. 93 (2003); Federal Election Commission v. Wisconsin Right to Life, Inc., 551 U.S. 449 (2007). 19. The most publicized of these is Republicans for Clean Air, which ran ads attacking John McCain in the 2000 presidential primaries. See David B. Magleby, “A High-Stakes Election,” in Financing the 2000 Election, edited by David B. Magleby (Brookings, 2002), pp. 1–21, 10. 20. Trevor Potter, “Campaign Finance Disclosure Laws,” in The New Campaign Finance Sourcebook, edited by Anthony Corrado and others (Brookings, 2005) pp. 123–60, 128. 21. Ibid. 22. Trevor Potter, “The Current State of Campaign Finance Law,” in The New Campaign Finance Sourcebook, edited by Corrado and others, pp. 48–90, 74–76. 23. Potter, “Campaign Finance Disclosure Laws,” pp. 123–24. 24. Anthony Corrado, “Money and Politics: A History of Federal Campaign Finance Law,” in The New Campaign Finance Sourcebook, edited by Corrado and others, pp. 7–47, 43. 25. Potter, “Campaign Finance Disclosure Laws,” pp. 127–28. 26. The limit on individual contributions to PACs ($5,000), the limit on PAC contributions to candidates and other PACs ($5,000), the limit on the amount individuals can give state parties for federal election purposes ($10,000), and the minimum amount that must be disclosed are not indexed to inflation by BCRA. 27. Potter, “The Current State of Campaign Finance Law,” p. 85. 28. Individual contributions to PACs are subject to a limit of $40,000 per election cycle; individual contributions to party committees and groups are limited to a combined total of $65,500 per cycle. Individuals may also give $10,000 to any state, district, or local party committee (not subject to the aggregate limit

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but subject to state-imposed limits, if any). See Center for Responsive Politics, “2008 Overview: Campaign Contribution Limits,” Open Secrets, 2010 (www. opensecrets.org/overview /limits.php [June 2009]), and Center for Responsive Politics, “About Levin Funds,” Open Secrets (www.opensecrets.org/industries/ levin_funds_pop.php). 29. Federal Election Commission, “2004 House Districts Where Millionaire Activity Was Reported” (www.fec.gov/press/bkgnd/hsemillion2004.pdf); Federal Election Commission, “2004 Senate Races Where Millionaire Amendment Was in Effect” (www.fec.gov/press/bkgnd/senmillion2004.pdf). 30. Paul S. Herrnson, “Financing the 2004 Congressional Elections,” in Financing the 2004 Election, edited by David B. Magleby, Anthony Corrado, and Kelly D. Patterson (Brookings, 2006), pp. 149–82, 168–69. 31. Davis v. Federal Election Commission, 128 S. Ct. 2759 (2008). 32. Anthony Corrado and others, The New Campaign Finance Sourcebook (Brookings, 2005), p. 185. 33. Federal Election Commission, “Quick Answers to Public Funding Questions” (www.fec.gov/ans/answers_public_funding.shtml [August 2009]). 34. Federal Election Commission, “General Election Funding” (www.fec. gov/info/pfund.htm [August 2009]). 35. Federal Election Commission, “Public Funding of Presidential Elections” (www.fec.gov/pages/brochures/pubfund.shtml#Convention [August 2009]). 36. Minor-party conventions may receive partial funding based on a ratio comparing their electoral performance with that of the major parties. See Federal Election Commission, “Reform Party to Receive Public Funding for 2000 Convention” (www.fec.gov/press/press1999/refconv.htm [August 2009]). 37. Among these are Maurice Taylor and Robert Dornan, both of whom ran in 1996. 38. Steve Forbes again declined matching funds in 2000. Magleby, “A HighStakes Election,” pp. 1–21, 14. 39. William G. Mayer, “An Incremental Approach to Presidential Nomination Reform,” PS: Political Science and Politics 42 (2009), pp. 65–69; David B. Magleby and William G. Mayer, “Presidential Nomination Finance in the Post-BCRA Era,” in The Making of the Presidential Candidates 2008, edited by William G. Mayer (Lanham, MD: Rowman and Littlefield, 2008), pp. 141–68, 164. 40. Anthony Corrado is cited making the point in Nelson W. Polsby, Aaron Wildavsky, and David A. Hopkins, Presidential Elections (Lanham, MD: Rowman and Littlefield, 2007), p. 57. 41. Anthony Corrado, “Financing the 2004 Presidential General Election,” in Financing the 2004 Election, edited by Magleby, Corrado, and Patterson, pp. 126–48, 128; David B. Magleby, “Change and Continuity in the Financing of Federal Elections,” in Financing the 2004 Election, edited by Magleby, Corrado, and Patterson, pp. 1–29, 9; Magleby, “A High-Stakes Election,” pp. 1–21, 13.

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42. Harris Interactive, “Harris Poll/BYU Study Shows Not Much Voter Interest in Candidates Rejecting Public Financing,” news release, June 17, 2008 (www. harrisinteractive.com/harris_poll/index.asp?PID=916 [July 2009]). See also Tad Walch and Jim Kuhnhenn, “Obama: No Public Campaign Cash,” Deseret News, June 20, 2008 (www.deseretnews.com/article/1,5143,700236346,00.html [June 2009]). 43. Anthony Corrado and Molly Corbett, “Rewriting the Playbook on Presidential Campaign Financing,” in Campaigning for President 2008, edited by Johnson, pp. 126–46, 141. 44. Paul Herrnson, Party Campaigning in the 1980s (Harvard University Press, 1988), p. 35. 45. Federal Election Commission Advisory Opinions 1978-10, 1978-50, 197917, and 1982-5. 46. The Tillman Act of 1907 (34 Stat. 864 [January 26, 1907]) banned the use of corporate general treasury funds for contributions to candidates or party committees, and the Taft-Hartley Act (61 Stat. 136 [1947]) did the same for unions in 1947. 47. David B. Magleby, Dictum without Data: The Myth of Issue Advocacy and Party Building (Provo, UT: Center for the Study of Elections and Democracy, 2001). 48. David B. Magleby, Bradley Jones, and David Lassen, “Turning the Tables: Individual Contributions, Member Contributions, and the Changing Campaign Finance Environment,” Forum: A Journal of Applied Research in Contemporary Politics 7, no. 1 (2009), art. 11, pp. 1–2. 49. Seth Gitell, “The Democratic Party Suicide Bill,” Atlantic, July–August 2003, pp. 106–13; Sidney Milkis, “Parties versus Interest Groups,” in Inside the Campaign Finance Battle: Court Testimony on the New Reforms, edited by Anthony Corrado, Thomas E. Mann, and Trevor Potter (Brookings, 2003), pp. 40–48, 43; Raymond La Raja, Small Change: Money, Political Parties, and Campaign Finance Reform (University of Michigan Press, 2008), p. 10. 50. Christian Ferry, deputy campaign director for McCain, panel discussion for The Change Election press event, Washington, DC, June 23, 2009. 51. Buckley v. Valeo, 44, n. 52. 52. David B. Magleby, “Interest Group Election Ads,” in Outside Money: Soft Money and Issue Advocacy in the 1998 Congressional Elections, edited by David B. Magleby (Lanham, MD: Rowman and Littlefield, 2000), pp. 41–62, 46. 53. Magleby, “A High-Stakes Election,” p. 10; Mai T. Dinh, Memorandum: Transcript from the Hearing on Political Committee Status, July 7, 2004 (www. fec.gov/pdf/nprm/political_comm_status/trans_04_14_04.pdf [June 2009]). 54. Stealth PAC Act, Public Law 106-230, 106th Cong., 2d sess. (July 1, 2000). 55. See Federal Election Commission, “Electioneering Communications,” January 2010 (www.fec.gov/pages/brochures/electioneering.shtml#Electioneering_ Communications).

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56. Federal Election Commission v. Wisconsin Right to Life, Inc., 551 U.S. 449 (2007); see also Rick Hasen, “Beyond Incoherence: The Roberts Court’s Deregulatory Turn in FEC v. Wisconsin Right to Life,” Minnesota Law Review 92 (2008), pp. 1064–109. 57. Adam Liptak, “Justices, 5-4, Reject Corporate Spending Limit,” New York Times, January 21, 2010 (www.nytimes.com/2010/01/22/us/politics/22scotus. html?scp=1&sq=Citizens%20United&st=cse [January 2010]). 58. Citizens United v. Federal Election Commission, 558 U.S. ___ (2010). 59. McConnell v. FEC; Austin v. Michigan Chamber of Commerce, 494 U.S. 652 (1990). 60. Citizens United v. FEC. 61. Buckley v. Valeo. 62. Colorado Republican Federal Campaign Committee v. Federal Election Commission, 518 U.S. 604 (1996). 63. Corrado and others, The New Campaign Finance Sourcebook, p. 151. 64. See David B. Magleby, J. Quin Monson, and Kelly D. Patterson, eds., Dancing without Partners: How Candidates, Parties, and Interest Groups Interact in the Presidential Campaign (Lanham, MD: Rowman and Littlefield, 2007). 65. See David B. Magleby and Kelly D. Patterson, eds., The Battle for Congress: Iraq, Scandal, and Campaign Finance in the 2006 Election (Boulder, CO: Paradigm, 2008). 66. See David Magleby, The Other Campaign: Soft Money and Issue Advocacy in the 2000 Congressional Elections (Lanham, MD: Rowman and Littlefield, 2002). 67. Variation in state populations is one factor in the relative expense of Senate races. Also important is the cost of media in a particular state. New Jersey, for example, is a more expensive state because competitive campaigns need to advertise in New York City and Philadelphia media markets. See also David B. Magleby, “Elections as Team Sports: Spending by Candidates, Political Parties, and Interest Groups in the 2008 Election Cycle,” in The Change Election: Money, Mobilization, and Persuasion in the 2008 Federal Elections, edited by David B. Magleby (Temple University Press, 2011), p. 64. 68. Congressional data for 2004 from FEC press release, June 9, 2005; presidential data from Center for Responsive Politics, “2004 Presidential Race,” Open Secrets (www.opensecrets.org/pres04/index.php?graph=spending); 2006 congressional data from Bob Biersack, deputy press officer, Federal Election Commission, e-mail communication with Stephanie Curtis, July 3, 2007; 2008 congressional data from Bob Biersack, deputy press officer, Federal Election Commission, e-mail communication with Stephanie Curtis, May 8, 2009; presidential data from Federal Election Commission, “Presidential Campaign Finance: Contributions to All Candidates by State” (www.fec.gov/DisclosureSearch/mapApp.do).

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69. Magleby, “A High-Stakes Election,” p. 10; Candice J. Nelson, “Spending in the 2000 Election,” in Financing the 2000 Election, edited by Magleby, pp. 22–48, 44. 70. Magleby, Dictum without Data. 71. David B. Magleby, J. Quin Monson, and Kelly D. Patterson, eds., Dancing without Partners: How Candidates, Parties, and Interest Groups Interact in the Presidential Campaign (Lanham, MD: Rowman and Littlefield, 2004), pp. 18–19, 22–23. 72. Leslie Wayne, “Clinton Aide’s Databank Venture Breaks Ground in Politicking,” New York Times, April 12, 2008 (www.nytimes.com/2008/04/12/us/ politics/12vote.html?adxnnl=1&adxnnlx=1207980224-Cf1rTCB6adThOjLXmE +4w [June 2009]). 73. See “How To Tell Your VoteBuilders from Your MyBOs, Your Catalists from Your VANs,” Atlantic, November 14, 2008, online at TechVote India (www.techvoteindia.com/index2.php?option=com_content&do_pdf=1&id=843). 74. Michael Myers, TargetPoint Consulting, interview by David Magleby, Washington, DC, December 2, 2008. 75. Eric S. Heberlig, Peter Francia, and Steven H. Greens, “The Conditional Party Teams of the 2008 North Carolina Federal Elections,” in The Change Election, edited by Magleby, pp. 108–39, 120. 76. Evan Tracey, chief operating officer of the Campaign Media Analysis Group, interview by David Magleby, Washington, DC, September 24, 2008; Evan Tracey, chief operating officer of the Campaign Media Analysis Group, telephone interview by David Magleby, May 20, 2009. 77. University of Wisconsin Advertising Project, “Obama Outspending McCain 3 to 1 on TV; Nearly 75% of Presidential Ad Spending in Red States,” press release, October 31, 2008 (wiscadproject.wisc.edu/wiscAds_release_103108.pdf [June 2008]). 78. Matt Bai, The Argument: Billionaires, Bloggers, and the Battle to Remake Democratic Politics (New York: Penguin Press, 2007), p. 9. 79. Allan J. Cigler, “Interest Groups and Financing the 2004 Election,” in Financing the 2004 Election, edited by Magleby, Corrado, and Patterson, pp. 208–40, 229; Center for Responsive Politics, “527 Committees: Top 50 Federally Focused Organizations,” Open Secrets (www.opensecrets.org/527s/527 cmtes.php?level=C&cycle=2004 [June 2009]). 80. Cigler, “Interest Groups and Financing the 2004 Election,” pp. 225–26. 81. Mark Silva, “Obama’s Ground Game: 770 Field Offices,” The Swamp, Chicago Tribune blog, October 24, 2008 (www.swamppolitics.com/news/politics/ blog/2008/10/obamas_ground_game_770_field_o.html [November 2009]). Christian Ferry reports that McCain had a total of 402 field offices. E-mail correspondence between David Magleby and Christian Ferry. Others estimate that Obama had 700 field offices. See Janet M. Box-Steffensmier and Steven E. Schier,

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eds., The American Elections of 2008 (Lanham, MD: Rowman and Littlefield, 2009), p. 146. 82. David B. Magleby, “A Change Election,” in The Change Election, edited by Magleby, pp. 1–26, 8. 83. Johnson, “An Election Like No Other?” p. 19. 84. Ibid, p. 13. 85. Ibid. 86. Magleby, “A Change Election,” p. 4. 87. Brian Wolff, Democratic Congressional Campaign Committee, interview by David Magleby, Washington, DC, December 2, 2008. 88. Michael P. McDonald and Thomas F. Schaller, “Voter Mobilization in the 2008 Presidential Election,” in The Change Election, edited by Magleby, pp. 100–02. 89. See Federal Election Commission, “Growth in PAC Financial Activity Slows,” news release, April 24, 2009 (www.fec.gov/press/press2009/20090415 PAC/20090424PAC.shtml). 90. David B. Magleby, J. Quin Monson, and Kelly D. Patterson, introduction to Dancing without Partners, edited by Magleby, Monson, and Patterson, pp. 24–25. 91. Peter H. Stone, “Business Nervously Eyes the Senate,” National Journal, July 26, 2008 (www.nationaljournal.com/njmagazine/ll_20080726_6007.php [June 2009]); Rob Engstrom, vice president of political affairs and federal relations, Chamber of Commerce, interview by David Magleby, Washington, DC, November 12, 2008. 92. Engstrom, interview. 93. Candidates may contribute to their own campaigns without limitation, to other campaigns with limitation, to the party committees (without limitation when transferring money from their campaign account and with limitation when contributing personal funds), and to PACs (with the same limitations as other individuals). Party committees may make limited contributions to candidates and PACs; they may also spend limited amounts as coordinated expenditures with candidates. 94. See David Magleby, “Rolling in the Dough: The Continued Surge in Individual Contributions to Presidential Candidates and Party Committees,” Forum: A Journal of Applied Research in Contemporary Politics 6, no. 1, art. 5, p. 4 (www. bepress.com/forum/vol6/iss1/art5 [August 2009]). 95. Vargas, “Obama Raised Half a Billion Online.” 96. Richard Wolffe, Renegade: The Making of a President (New York: Crown Publishers, 2009), p. 74–75. 97. Magleby, Jones, and Lassen, “Turning the Tables.” 98. See American National Election Studies, “Time Series Studies, 2000–2004” (ftp://ftp.electionstudies.org/ftp/resourcs/questions/2000s.htm). The wording of

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this question has not been consistent over the course of the ANES studies. The question was not presented in this form until 1980. Previously, respondents were asked whether they had given to either a party or a candidate, not just whether they had given to an individual candidate. In other words, the numbers we get over this range of years will conflate two different sets of data, one being contributions to a candidate and the other being contributions to a party or candidate. There is not a way to look only at contributions to individual candidates. 99. In the Cooperative Congressional Election Study the proportion reporting having made a contribution was 29 percent. 100. Kelly D. Patterson, “Spending in the 2004 Election,” in Financing the 2004 Election, edited by Magleby, Corrado, and Patterson, pp. 68–93, 79. 101. For the 2004 election cycle the aggregate individual limit was $95,000. In 2007–08 that limit was raised to $108,200. 102. Martin Kady II, “Ensign: GOP Senators Need to Pony Up for ’08 Races,” Politico Live, Politico.com blog, February 13, 2008 (www.politico.com/blogs/the crypt/0208/Ensign_GOP_senators_need_to_pony_up_for _08_races.html [October 2009]).

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The Regulatory Environment of the 2008 Elections anthony corrado

T

he election of 2008 was the third federal election conducted under the regulations prompted by the 2002 Bipartisan Campaign Reform Act (BCRA). Yet as the election cycle began, the debate over the law’s restrictions and implementation was still being waged. Congress’s decision to pass BCRA did not diminish the controversy over campaign finance reform; instead, the battle shifted to the next steps in the policy process. Opponents of the law turned to the courts and the Federal Election Commission (FEC), the agency responsible for crafting regulations to implement the provisions of the law, in hopes of overturning some of its restrictions or at least minimizing their effects. Advocates of the law responded, seeking to prevent the adoption of regulations that would undermine the efficacy of the law. The lawsuits and regulatory challenges that resulted served to delay final determinations on the application of the law and reinvigorated debate over the constitutionality of campaign finance prohibitions. The disputes over BCRA—and campaign finance regulation more broadly—persisted throughout the election cycle. The political and ideological divisions that emerged during the congressional debate, which were represented by the disagreements between Senator John McCain, one of BCRA’s principal sponsors, and Senator Mitch McConnell, one of its leading opponents, endured even after the Supreme Court affirmed the constitutionality of BCRA in its 2003 decision in McConnell v. Federal Election Commission.1 The law had been passed by majorities in Congress consisting of Democrats and a relatively small number of proreform 48

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Republicans, as the vast majority of Republicans opposed the law. The Supreme Court’s 5-4 ruling in support of the law did little to quell Republican opposition, especially among conservatives who felt that BCRA’s restrictions violated the right of free speech. Conservative critics therefore continued their legal battle against regulation by filing a number of lawsuits based on the application of the law in specific circumstances. They hoped that these “as-applied” challenges would result in an easing of the law’s restrictions, especially with respect to the prohibitions on the use of corporate funds to finance electionrelated advertisements. They focused on the courts as their preferred arena of conflict because a change in the membership of the Supreme Court offered the prospect of a more conservative majority less favorable toward regulation than the majority that upheld BCRA when it was first considered by the Court. This placed advocates of regulation on the defensive, requiring them to take to the courts to maintain the reforms they had achieved through hard-fought legislative battles over the years. In addition to these “as-applied” challenges to BCRA’s statutory provisions, lawsuits were filed against the regulations adopted by the FEC to implement the law. Some of these disputes involved issues unique to BCRA; others centered on long-standing controversies that were renewed in its wake. Advocates of the law, led by BCRA’s congressional sponsors, asked the courts to intervene against the FEC, arguing that the rules proposed by the agency were too permissive and would undermine the efficacy of the law. Opponents of the law, as well as some of the organizations subject to its provisions, also filed suits against the agency, arguing that the rules established by the agency were too restrictive. These cases, which produced varied outcomes, served to delay the adoption of final rules to complete BCRA’s implementation. The rule-making process was also delayed by the extraordinary situation that emerged at the FEC. The political divisions that had developed in the Senate over the merits of BCRA once again came to the fore over the issue of FEC appointments. This led to a protracted political standoff in the Senate over the approval of commission nominees. The FEC therefore began the election year with only two of its six commissioners in place, lacking the minimum of four members needed to constitute a quorum and take effective action. Thus for the first six months of 2008 the FEC was rendered powerless: it was incapable of issuing advisory opinions, promulgating regulations, or undertaking enforcement actions. By the time the deadlock was broken and the necessary appointments

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approved, the commission had insufficient time to complete all the required rule-making procedures. The election ended with the FEC still involved in the task of drafting the regulations required by BCRA. The regulatory changes that did take place in advance of the 2008 election signaled a swing of the pendulum with respect to campaign finance reform. While advocates of greater restrictions on campaign money achieved significant victories in Congress and the courts before the 2004 election, these gains, in some instances, proved to be short-lived. Opponents of regulation found the courts to be a receptive arena for their concerns in the years after the 2004 election, and they achieved a number of important victories. The most significant developments were the result of rulings by the Supreme Court, where a new majority struck down two of BCRA’s major provisions and overturned the long-standing prohibition on corporate spending in federal elections. The lower courts also issued important rulings, some of which served to weaken the scope and restrictions of the law. The period that encompassed the 2008 election was thus defined by notable changes in the law, which will have a substantial effect on the financing of elections in the years ahead.

Regulation in the Courts The period leading up to the 2008 election featured an unusually large number of court cases involving federal campaign finance law. Taken as a whole, these cases constituted a broad assault on campaign finance regulations. Some of these challenges raised specific questions about the constitutionality of BCRA’s Millionaires Amendment—which would ease fundraising restrictions on candidates facing a high-spending, self-financed opponent—and electioneering communications rules. Others attacked the regulations proposed to meet the law’s requirements. Lawsuits were also filed against pre-BCRA regulations, including the rules governing the activities of independent political committees and Section 527 organizations. Even the prohibition against the use of corporate funds to support federal candidates—a provision of federal law since 1947—became a matter of litigation. The activity in the courts was influenced by a change in the membership of the Supreme Court. The 5-4 majority that had supported BCRA’s prohibitions on party soft money and restrictions on the financing of electioneering communications included Justice Sandra Day O’Connor, who announced her decision to retire in July 2005. President Bush nominated

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Judge John Roberts to replace her on the bench. While Roberts’s nomination was awaiting Senate approval, Chief Justice William Rehnquist died. Bush thereupon nominated Roberts for the position of chief justice. O’Connor’s seat was eventually filled by Judge Samuel Alito after the president’s first choice, White House counsel Harriet Miers, withdrew amid criticism concerning her qualifications. Alito also proved to be a controversial nominee. Democrats opposed his nomination based on his prior positions on abortion, executive powers, and electoral apportionment, claiming that he was too conservative for appointment to the high court.2 An attempted filibuster failed, and Alito was confirmed by a vote of 58 to 42, the closest confirmation vote in more than a decade.3 He took his seat on the bench on January 31, 2006. Alito’s elevation to the high court raised the prospect of a shift in the majority on the Court, since he was perceived to be less favorable to campaign finance regulation than Justice O’Connor.4 This possibility emboldened those opposed to the law’s restrictions to pursue litigation as a means of achieving their ends. The efficacy of this strategy became apparent in the judgments rendered on various aspects of the law.

The Millionaires Amendment: Davis v. Federal Election Commission In McConnell v. Federal Election Commission, the Supreme Court had struck down two minor provisions of BCRA—a ban on contributions by minors and a requirement that parties make a choice between coordinated expenditures and independent expenditures when supporting candidates— but left the major pillars of the law—a ban on party soft-money funds, new rules for electioneering communications, and the so-called Millionaires Amendment—intact. The Court specifically upheld the constitutionality of the soft-money ban and the electioneering communications restrictions. It did not render a judgment on the Millionaires Amendment because the plaintiffs lacked standing on the issue. Any constitutional questions associated with this provision were thus left for a future asapplied challenge. That challenge came in advance of the 2006 midterm election and proved to be the first step in the unraveling of BCRA’s major reforms. The Millionaires Amendment, a part of BCRA added by the Senate, consisted of a set of complicated financial calculations, known as the “opposition personal funds amount,” that could trigger higher contribution limits or even unlimited party-coordinated spending for a challenger

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who faced a self-financed opponent, depending on the amount spent by the opponent. At the highest levels of spending, the provision would allow a House candidate facing a self-financed opponent to accept individual contributions up to three times the amount generally permitted by the law (that is, $6,000 per individual for each election, adjusted for inflation, as compared with $2,000 for each election, adjusted for inflation). A Senate candidate would be allowed to raise contributions six times greater (that is, $12,000 as compared with $2,000, both adjusted for inflation). At certain thresholds of spending, national and state party committees would be permitted to make unlimited coordinated expenditures on behalf of the candidate who was not self-funded.5 The amendment also placed a limit of $250,000 on the amount a self-funded candidate could be repaid after the election. The calculation of the opposition personal funds amount is based on information about a self-financed candidate’s assets and spending. The law therefore imposed special disclosure requirements on self-funded candidates. These included three types of disclosure. First, within fifteen days of entering a race, a candidate had to disclose whether he or she intended to spend more than a threshold amount of personal funds ($350,000 in the case of a House race). Second, once this threshold amount was reached, the candidate had to notify the FEC within twenty-four hours. Third, the candidate had to notify the FEC within twenty-four hours of each additional expenditure of $10,000 or more from personal funds. In sum, a self-funded candidate was required to disclose his or her intent to spend large sums of personal money and thereafter report spending on a timely basis throughout the course of the campaign. Jack Davis, a wealthy Democratic candidate for the House seat in New York’s Twenty-Sixth District, challenged the constitutionality of these provisions in advance of the 2006 midterm election. Davis ran for Congress in 2004 and 2006, both times losing to incumbent Tom Reynolds and both times spending more than $1 million of his own money.6 In March 2006 Davis announced his candidacy and filed a disclosure report with the FEC declaring his intention to spend $1 million in personal funds during the general election. Two months later, he filed suit against the FEC, asking that the Millionaires Amendment provisions be declared unconstitutional. Before he took this action, but after he had declared his candidacy, the FEC informed him that they had reason to believe that he had violated the disclosure provisions of the law in his 2004 bid for office. The two parties

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agreed that this enforcement action would be placed on hold until the legal challenge was resolved. Davis sought expedited review of his case, but even so, the Supreme Court did not rule on his challenge until after the 2006 campaign. On June 26, 2008, the Court issued its opinion, declaring the Millionaires Amendment’s contribution limits and disclosure requirements unconstitutional. In a 5-4 majority opinion written by Justice Alito, who was joined by Chief Justice Roberts and Justices Scalia, Kennedy, and Thomas, the Court found that the rules impermissibly burdened Davis’s “First Amendment right to spend his own money for campaign speech.”7 By allowing a self-funded candidate’s opponent to benefit from higher contribution limits and unlimited party-coordinated spending, BCRA imposed, according to the Court, “an unprecedented penalty on any candidate who robustly exercises that First Amendment right. [The law] requires a candidate to choose between the First Amendment right to engage in unfettered political speech and subjection to discriminatory fundraising limitations.” Self-funded opponents, therefore, had to “shoulder a special and potentially significant burden” that was “not justified by any governmental interest in eliminating corruption or the perception of corruption.” The Court rejected the argument that the law was justified because it helped to “level electoral opportunities for candidates of different personal wealth,” thereby reducing “the natural advantage that wealthy individuals possess in campaigns for federal office.” Citing Buckley v. Valeo and other precedents, the Court noted that preventing corruption or the appearance of corruption was the only compelling interest that could justify such a burden on political speech and that equalizing the relative resources of candidates was not “a legitimate government objective.” In fact, the Court argued, the rules actually did a disservice to the corruption interest, since “reliance on personal funds actually reduces the threat of corruption.”8 Accordingly, the Court struck down the provisions of the Millionaires Amendment that loosened contribution and spending restrictions, as well as the amendment’s special disclosure requirements. It essentially returned to the pre-BCRA status quo, wherein a congressional candidate could spend an unlimited amount of his or her own money in a bid for office with no compensatory advantages granted to an opponent. The FEC responded quickly, announcing in July that it would no longer enforce the provisions in congressional races, retroactive to June 26, the date of the

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Court’s ruling.9 It therefore dissolved the law in the middle of the 2008 campaign. Challengers facing self-funded opponents were no longer eligible for higher contribution limits, but those who had received increased contributions before June 26 were allowed to retain those funds, so long as the funds were properly spent in connection with the election for which they were raised. The commission also dismissed six pending enforcement actions related to the amendment, including the one against Davis.10 It did, however, continue to enforce the restriction on the amount of money that could be repaid to a candidate for self-made campaign loans, since this provision was not at issue in Davis and was not struck down by the Court.

Electioneering Communications: Wisconsin Right to Life The most important judicial decisions on campaign finance regulation were those focused on the rules governing electioneering communications. The Bipartisan Campaign Reform Act sought to limit the use of unregulated funds to pay for advertisements that featured federal candidates by establishing a new category of regulated communications, known as electioneering communications.11 The act defined an electioneering communication as any broadcast, cable, or satellite communication that refers to a clearly identified federal candidate, is broadcast within thirty days of a primary election or sixty days of a general election, and is targeted at the constituency of the featured candidate. Any advertisement that met these criteria could not be financed with corporate or labor union treasury funds; only individual or PAC donations were permitted. The law also required disclosure to the FEC of expenditures on electioneering communications totaling $10,000 or more in a calendar year, along with the names and addresses of individuals or groups making contributions of more than $1,000 toward funding such communications. The constitutionality of BCRA’s prohibition on the use of corporate funds to finance electioneering communications in the period leading up to an election was challenged by Wisconsin Right to Life. Wisconsin Right to Life (WRTL), a tax-exempt, nonprofit advocacy corporation that receives corporate funding, brought the case, Wisconsin Right to Life, Inc. v. Federal Election Commission, in connection with advertisements it was running and intended to run in Wisconsin. Specifically, the group ran three ads in July and August 2004 that encouraged listeners to contact Wisconsin senators Russ Feingold and Herbert Kohl and urge them to oppose any Senate filibuster against President Bush’s federal judicial nominees.12 None

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of the advertisements referenced the senators’ past votes on the filibuster issue or contained language that could be construed as promoting, attacking, supporting, or opposing either senator. Wisconsin Right to Life argued that it intended to run the advertisements until Congress adjourned but had had to stop in August because its use of corporate funds to pay for the ads would have violated the electioneering communications restrictions. The organization therefore went to court, arguing that the regulation unconstitutionally restricted its political speech because it did not include an exemption for “grassroots lobbying.” The organization contended that its ad constituted grassroots lobbying rather than electioneering. The broader context of the advertising campaign raised questions as to whether any of the ads constituted “express advocacy” of a candidate and thus did not qualify as grassroots lobbying. One of the senators mentioned in the ads, Senator Feingold, was up for reelection in 2004, and WRTL’s PAC had endorsed his opponent. The advertisements did not encourage viewers or listeners to call Senator Feingold or share their views on filibusters but instead directed individuals to a website created by WRTL (www.befair.org), which featured e-alerts that criticized Feingold on the filibuster issue. Furthermore, the advertisements began airing after the last filibuster votes had been held in the Senate session and the members had departed for a six-week recess. Wisconsin Right to Life ran no additional advertisements after the 2004 election and throughout 2005, when filibusters of judicial nominations were once again a focal point of controversy.13 The initial question raised by the case was whether the controversy could be adjudicated as an “as-applied” challenge in light of the Supreme Court’s decision in McConnell v. FEC (2003). In McConnell, the Court decided that advertisements that mentioned federal candidates and were broadcast close to the election, even if they did not include messages that expressly advocated the election or defeat of a candidate, were the “functional equivalent” of express advocacy and thus subject to federal regulation. In fact, in reviewing the definition of electioneering communications, the Court had noted that it upheld “all applications” of the definition.14 In ruling on WRTL’s challenge, the district court agreed with this view, noting that “the reasoning of the McConnell Court leaves no room for the kind of ‘as-applied’ challenge WRTL propounds before us.” Accordingly, in May of 2005, the district court dismissed the complaint, concluding that “WRTL’s ‘as-applied’ challenge to BCRA is foreclosed by the Supreme Court’s decision in McConnell.”15

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The Supreme Court, however, disagreed. Wisconsin Right to Life appealed the decision of the district court and found a more receptive audience for its view on the high court. On January 23, 2006, the Supreme Court issued its opinion on the status of the as-applied challenge in Wisconsin Right to Life (a ruling that became known as WRTL I, to distinguish it from the subsequent ruling on the substantive issues involved) and vacated the district court ruling, explaining that in upholding BCRA’s regulations in McConnell, the Court “did not purport to resolve future ‘asapplied’ challenges.” The Court therefore sent the case back to the district court to “consider the merits of WRTL’s as-applied challenge in the first instance.”16 A three-judge district court panel agreed with WRTL’s argument and, in a 2-1 vote, held that BCRA’s electioneering communication restrictions were unconstitutional as applied to WRTL’s advertisements. The twoperson majority argued that the ads “were not ‘intended to influence the voters’ decisions,’ and thus, the Court need not analyze whether the ads in fact would have—or potentially could have—affected Senator Feingold’s reelection.” In the district court’s view, the broadcasts were “not the functional equivalent of express advocacy.” Instead, they were judged to be issue advertisements protected under the First Amendment’s right of free speech and should not be restricted by BCRA’s funding prohibitions and sixty-day timeline rule. The majority thus stated, “We are hard-pressed indeed to conclude that preserving [BCRA’s] . . . bright line rule is a sufficiently compelling interest to warrant the ongoing regulation of these ads under BCRA.”17 The FEC appealed the decision to the Supreme Court, and the Court issued its opinion in Federal Election Commission v. Wisconsin Right to Life, Inc. (which became known as WRTL II) on June 25, 2007.18 In a 5-4 decision, the Court affirmed the judgment of the district court and held that BCRA’s restrictions were unconstitutional as applied to WRTL’s advertisements. Chief Justice Roberts wrote the opinion, with Justice Alito concurring. They were joined by Justices Scalia, Kennedy, and Thomas, who filed a separate opinion arguing that the electioneering communication prohibitions were unconstitutional and should be struck down. In the view of the Court, the WRTL advertisements were genuine issue ads that did not constitute the “functional equivalent of express advocacy.” In McConnell, the Court had determined that even those ads that did not expressly advocate the election of a candidate (that is, did not say “vote for Smith”) were the functional equivalent if they were intended to

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influence the voters’ decisions and have that effect.19 The FEC relied on this language in arguing that the BCRA regulations were justified. But the majority in WRTL II rejected a reliance on intent and effect as a standard for regulation, noting that “an intent-based test would chill core political speech by opening the door to a trial on every ad within the term of §203 [of BCRA], on the theory that the speaker actually intended to affect an election, no matter how compelling the indications that the ad concerned a pending legislative or policy issue.” Accordingly, the Court concluded, “An ad is the functional equivalent of express advocacy only if the ad is susceptible of no reasonable interpretation other than as an appeal to vote for or against a specific candidate. Under this test, WRTL’s three ads are plainly not the functional equivalent of express advocacy.” In rendering this judgment, the Court signaled the general approach that informed its decision: “The First Amendment requires us to err on the side of protecting political speech rather than suppressing it.”20 The Court thus carved out a major exception to BCRA’s restrictions. In effect, the majority rejected the bright-line, preelection time period as a trigger for regulation. If an advertisement could be reasonably interpreted to serve some purpose other than advocating the election or defeat of a candidate, BCRA’s ban on the use of corporate or labor union funds to finance the ad, as well as the disclosure requirements, would not apply. In other words, the Court revived the possibility of using unlimited and undisclosed monies to finance the types of candidate-centered issue ads that had become prevalent before the adoption of BCRA. As Justice Souter noted in dissent, “After today, the ban on contributions by corporations and unions and the limitation on their corrosive spending when they enter the political arena are open to easy circumvention, and the possibilities for regulating corporate and union campaign money are unclear.”21 A practice that BCRA was designed to foreclose was thus restored by the Court.

Electioneering Communications and Corporate Expenditures: Citizens United The decision in WRTL II would prove to be but the first step in reversing BCRA’s restrictions. Instead of resolving the controversy, it left the door open to future challenges. Indeed, Justice Alito, who proved to be the key vote in the Court’s 5-4 decision, acknowledged the possibility of revisiting the statute. In his concurring opinion, which consisted of a single paragraph, he noted, “If it turns out that the implementation of the as-applied

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standard set out in the principal opinion impermissibly chills political speech, we will presumably be asked in a future case to reconsider the holding in McConnell . . . that §203 is facially constitutional.”22 It was not long before this presumption was realized. In December 2007 a conservative nonprofit advocacy group, Citizens United, filed a suit against the FEC seeking to prevent the application of BCRA’s regulations to a film produced and distributed by the organization. Hillary: The Movie was a ninety-minute, feature-length film that was highly critical of Senator Hillary Clinton. Citizens United financed the film and planned to distribute it in theaters, as a DVD, and through a video-ondemand cable television service. The group also prepared three ads to promote the film. At the time of the film’s distribution, Senator Clinton was a frontrunner for the Democratic Party’s presidential nomination, and the movie was shown in six cities in January and early February of 2008, a crucial period in the presidential primary elections.23 Although it had an affiliated PAC that could have provided funding, Citizens United wanted to use its own funds, including some corporate contributions, to finance the advertising and distribution of the film. After the Supreme Court’s ruling in WRTL II, the FEC adopted revised electioneering communications regulations that incorporated the “no other reasonable interpretation” standard set forth by the Court to determine whether a communication was the functional equivalent of express advocacy.24 In accordance with these regulations, the FEC determined that Hillary qualified as an electioneering communication subject to the BCRA restrictions on corporate funding. In addition, the FEC held that the advertisements to be used to promote the film were also subject to BCRA’s restrictions. The commission further decided that any promotional ads had to include a disclaimer notice, and any money spent on advertising would be subject to BCRA’s disclosure requirements, including the disclosure of any donors who gave Citizens United more than $1,000. Citizens United filed suit against the FEC, challenging the application of the corporate funding restrictions and disclosure requirements to Hillary and its promotional advertisements. The group contended that the film was a documentary on Senator Clinton’s Senate record, her White House record during President Clinton’s administration, and a biographical statement that was not the functional equivalent of express advocacy pursuant to the Court’s ruling in WRTL II. Citizens United therefore sought an injunction against the FEC’s application of the BCRA requirements.

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A district court panel denied this request in January of 2008. In the view of the court, Hillary: The Movie was the functional equivalent of express advocacy and the type of communication that the law was designed to regulate. The court declared, “The Movie is susceptible of no other interpretation than to inform the electorate that Senator Clinton is unfit for office, that the United States would be a dangerous place in a President Hillary Clinton world, and that viewers should vote against her.” In reaching this conclusion, the court noted that The Movie did not focus on legislative issues, that it made references to the election and Senator Clinton’s candidacy, and that it took a position on her character, qualifications, and fitness for office.25 Citizens United appealed the decision to the Supreme Court, and the high court accepted the appeal in November 2008. In presenting its case, Citizens United significantly expanded the scope of its challenge. Instead of simply arguing against the application of the electioneering communication regulations in the instance of Hillary: The Movie, the group mounted a broad attack on the constitutionality of the electioneering communication regulations. The group maintained that the BCRA rules were unconstitutional as applied to its film and promotional ads, arguing that they were not the functional equivalent of express advocacy and were not the type of thirty-second political advertisements that Congress intended to regulate.26 They further contended that the disclaimer and disclosure requirements were unconstitutional, since they served no compelling interest in preventing corruption and would impose an administrative burden on the group, forcing it to spend resources to comply with the act and discouraging future donors from contributing to the organization because of their reluctance to be publicly identified. This, in turn, would infringe upon their associational rights under the First Amendment.27 Citizens United’s arguments, however, went beyond a criticism of the applicability of BCRA’s provisions and the decision in McConnell to uphold the constitutionality of the law. The group also struck at an underlying foundation of the law—the ban on corporate spending in federal elections. They directly challenged the validity of the Supreme Court’s 1990 opinion in Austin v. Michigan Chamber of Commerce, which had affirmed the constitutionality of restrictions on corporate expenditures in elections. In Austin, the Court upheld a ban on corporate spending on a ballot measure on the basis that the government had a compelling interest in safeguarding against the “corrosive and distorting effects of immense aggregations of wealth that are accumulated with the help of the

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corporate form.”28 Citizens United contended that Austin “was wrongly decided and should be overruled because it is flatly at odds with the wellestablished principle that First Amendment protection does not depend upon the identity of the speaker.”29 Whether the Court would follow precedent and simply rule on the application of the regulations to Hillary or take up the broader issue raised by Citizens United was a question that generated great speculation and interest among members of the regulated community and groups advocating and opposing campaign finance reform. The Court’s ruling was therefore highly anticipated. But on the last scheduled day of the Court’s term (June 29, 2009), the justices issued no opinion. Instead, Chief Justice Roberts issued an order requesting additional arguments on the broader free speech questions raised in the case. Specifically, the Court directed the parties involved to file supplemental briefs addressing the following question: “For the proper disposition of this case, should the Court overrule either or both Austin v. Michigan Chamber of Commerce and the part of McConnell v. Federal Election Comm’n, which addresses the facial validity of Section 203 of the Bipartisan Campaign Reform Act of 2002?”30 With this question, the Court indicated its interest in adjudicating the broader free speech issues invoked in the case. This heightened the case’s importance, elevating it from an as-applied challenge to BCRA to a decision with potentially wide ramifications. The 1947 Taft-Hartley Act barred the expenditure of corporate or labor union treasury funds in federal elections.31 This law was designed to strengthen the ban on corporate contributions to candidates established by the 1907 Tillman Act. With the adoption of Taft-Hartley, corporations and labor unions were barred from using their treasury funds to make contributions or expenditures in support of federal candidates. These prohibitions thereafter became an enduring part of federal campaign finance law. This meant that corporations or labor unions could not use their treasury funds to make independent expenditures that advocated the election or defeat of a candidate. The Bipartisan Campaign Reform Act extended this restriction to include electioneering communications. The Court’s request for reargument suggested that it might be willing to reconsider the constitutionality of this ban on corporate spending. Citizens United v. Federal Election Commission thus became one of the most important campaign finance cases in recent decades. The case attracted great attention from advocates on both sides of the issue. In the requested reargument, more than forty amicus curiae briefs

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were filed for and against the challenged provisions, and the Court scheduled a rare September oral argument with extended time to hear the views on both sides.32 The Court did not issue an opinion until January 2010, so its decision had no effect on the financial activity that took place in 2008. But the ruling will have a substantial effect on campaign financing in the future. The Court found that Hillary was the equivalent of express advocacy because it was susceptible to no reasonable interpretation other than as a “feature-length negative advertisement that urges viewers to vote against Senator Clinton for President.”33 The movie and its promotional ads were therefore subject to the restrictions of the electioneering communications regulations and could not be funded with corporate treasury funds. But in a highly controversial decision, a 5-4 majority ruled that under the First Amendment, corporations have the right to spend money independently to express their views on federal candidates. The Court thus deemed the provisions of federal law that prohibited corporations from making independent expenditures from treasury funds, as well as BCRA’s electioneering communications restrictions, to be unconstitutional limitations on freedom of speech. The Court’s decision was based on its conception of the right of political speech. The Court’s majority held that the First Amendment did not permit restrictions on speech based on the identity of the speaker. The government may not privilege some viewpoints or speakers (for example, individuals) to others (for example, corporations) since this “deprives the public of the right and privilege to determine for itself what speech and speakers are worthy of consideration.” Instead, First Amendment protections extend to the political speech of all, including corporations and other associations of individuals (including, presumably, labor unions). Corporations and other associations therefore should not be treated differently because they are not “natural persons.”34 Relying on the analysis in the 1976 Buckley decision, the Court noted that any restraint on the political speech of corporations must be based on the governmental interest in preventing corruption or the appearance of corruption, which the Court interpreted as quid pro quo transactions. The Court in Buckley struck down limits on independent expenditures on the view that such expenditures lack any prearrangement or coordination with a candidate and therefore do not entail the risk that expenditures will be made as a quid pro quo for commitments from a candidate. But the ban on corporate spending was not at issue in Buckley. Accordingly,

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the Court in Citizens United held that restrictions on independent expenditures by corporations do not serve the governmental interest in preventing corruption and thus are an unjustified limitation on free speech. The Court clearly declared that “independent expenditures, including those made by corporations, do not give rise to corruption or the appearance of corruption.”35 The Court thus rejected the antidistortion rationale accepted in Austin, which advanced a broader conception of corruption and found it to encompass the corruptive potential of large aggregations of wealth and the unfair advantage that corporations might achieve from their financial resources when employed in the political marketplace. The Court argued that Austin had been wrongly decided, in part because the prohibitions on corporations were meant to equalize influence, which is a purpose that had been rejected in Buckley as a foundation for restricting campaign funding. “The First Amendment’s protections,” the majority concluded, “do not depend on the speaker’s ‘financial ability to engage in public discussions.’”36 In support of this view, the Court pointed not only to Buckley but also to the decision in First National Bank of Boston v. Bellotti, a 1978 case in which the Court struck down a state law banning corporate independent expenditures in a ballot campaign.37 The Court therefore argued that Austin had bypassed earlier precedents by finding “a new governmental interest in limiting political speech,” one that allowed government to ban political speech “simply because the speaker is an association that has taken on the corporate form.”38 In a concurring opinion, Chief Justice Roberts, joined by Justice Alito, explained why the decision was not an overreach by the Court in exerting its authority, even though it was overturning recent precedents. The chief justice noted that stare decisis, the practice of abiding by precedent in rendering decisions, is a “principle of policy” and the “preferred course” in the proper exercise of the judicial function but does not demand a reliance on a “prior erroneous holding.” In such an instance, the Court must balance the importance of deciding a constitutional question against the importance of deciding it correctly. When fidelity to a precedent does more to damage a constitutional ideal than to advance it, or when a precedent “is so hotly contested that it cannot reliably function as a basis for decision in future cases,” then the rule of law is best served by departing from precedent. In the opinion of the chief justice, past decisions upholding bans on corporate political speech had undermined the careful constitutional line drawn between contributions and expenditures

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in Buckley and introduced reasoning inconsistent with the Court’s “explicit repudiation” of any government interest in equalizing the relative ability of individuals and groups to influence an election.39 Based on this argument, the decisions in Austin and, to a lesser extent, McConnell were viewed as rulings that had transformed the law. They had permitted unjustified infringements on the right of political speech. In Roberts’s view, overturning these decisions and returning to pre-Austin rationales was the best way to preserve the rule of law and uphold the values of the First Amendment. The Court did, however, by a vote of 8-1 (Justice Thomas being the lone dissenter) uphold the disclaimer and disclosure requirements applied to independent expenditures and electioneering communications. These included the regulations that require advertisements to include a notice of the speaker responsible for the content of advertising and the rules that mandate disclosure of the person making an expenditure, the election to which the communication was directed, and the names of certain contributors. The Court maintained that these regulations serve a government interest by providing the electorate with information that can help “[e]nsure that the voters are fully informed about the person or group who is speaking” and thereby facilitate “informed choices in the political marketplace.”40 Any corporation that spends money independently to support a candidate therefore has to abide by these requirements. The decision ignited an immediate public controversy upon its release. Advocates of BCRA and regulation more broadly expressed outrage at the Court. The chorus of opposition included President Obama, who contended that the decision would “open the floodgates for special interests . . . to spend without limit in our elections” and led him to take the unusual step of criticizing the Court’s decision in his State of the Union speech.41 Senator Russell Feingold, one of the cosponsors of BCRA, called the decision “a terrible mistake” that ignored “important principles of judicial restraint” and gave “corporate money a breathtaking new role in federal campaigns.”42 Other advocates described the outcome as “a disaster for the American people” and a result that would “empower corporations to use their enormous wealth . . . and in doing so, buy even more power over the legislative process and government decision making.”43 Conversely, Senator McConnell praised the Court for a “monumental decision” that took “an important step in the direction of restoring the First Amendment rights of groups to express themselves . . . up until Election Day.”44 Conservatives generally heralded the opinion as a

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“core reading of the First Amendment” and praised the Court for sweeping “away much of an extraordinarily tangled and confusing legal thicket of regulations and interpretations.”45 Regardless of one’s perspective, it is clear that Citizens United produced a dramatic change in the scope of federal regulation. Corporations—and by extension labor unions—would be allowed to spend their treasury funds on independent expenditures in support of candidates. Whether this would lead to a surge in corporate and labor union spending remained to be seen. But it is likely that the result would be a greater role for corporate and labor union spending in federal elections in the years ahead.

Implementing the Law: Shays I and III The battle in the courts moved from legal decisions that overturned provisions of BCRA to debate over the regulations adopted by the FEC to implement the law. These disputes began before the 2004 election, when Representatives Christopher Shays and Martin Meehan, cosponsors of BCRA in the House, filed suit against the FEC, arguing that the regulations adopted by the commission to implement BCRA were contrary to the intent of the law and would undermine its effects. Basically, plaintiffs alleged that the FEC abided by a narrow interpretation of the statute, promulgating rules that would limit the breadth of its reach. Advocates of the law sought a more expansive interpretation that would broaden BCRA’s effect and better ensure that its purposes would be achieved.46 The disagreement led to a number of court cases focused on FEC regulatory decisions. Representatives Shays and Meehan began challenging the FEC in October 2002, when they filed a legal complaint arguing that many of the regulations adopted by the commission contravened the language of the statute and would “frustrate the purpose and intent of . . . BCRA by allowing soft money to continue to flow into federal elections and into the federal political process.”47 The case, Shays and Meehan v. Federal Election Commission (known as Shays I), was filed in the District Court for the District of Columbia and was heard by Judge Colleen Kollar-Kotelly, a member of the panel that had heard McConnell and upheld the constitutionality of BCRA. In September 2004 the judge issued her opinion, striking down fifteen separate regulations implementing BCRA and directing the FEC to conduct new rule makings on some of the invali-

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dated rules.48 This action ensured that the regulatory controversy would continue after the 2004 election. In 2006 the FEC adopted revised regulations in response to the court’s ruling in Shays I. In July of that year, Representatives Shays and Meehan filed another suit, which became known as Shays III. The representatives challenged the commission’s proposed rules defining illegal “coordination” between candidates and groups, as well as the rules defining the federal election activity that had to be financed with hard money. The suit also contested the rules that would allow federal elected officials or candidates to speak at state or local party fundraising events where soft money could be solicited. In June 2008 the U.S. Court of Appeals for the District of Columbia issued a final judgment in Shays III. In a unanimous decision, the Court struck down the challenged regulations, with the exception of a minor rule that created a “safe harbor” for vendors and groups who had established a firewall to separate their activities associated with certain coordinated communications. The court found that the FEC regulations “not only [made] it eminently possible for soft money to be ‘used in connection with federal elections’” but “also provide[d] a clear roadmap for doing so, directly frustrating BCRA’s purpose.” Moreover, the court determined that the regulations “expressly allowed ‘solicitation’ of soft money” by federal officials at state and local fundraisers, an action that BCRA directly prohibited. As a result, the regulations “would lead to the exact perception and possibility of corruption Congress sought to stamp out in BCRA.”49 Accordingly, the court required the FEC to engage in yet another proceeding to craft permissible regulations, a task that it did not complete before the end of the 2008 election cycle. So six years after the statute was adopted, the controversy over implementing regulations was not yet resolved.

Regulating 527s: Shays II and EMILY’s List At about the same time that the district court issued the ruling in Shays I in September of 2004, Representatives Shays and Meehan filed another lawsuit against the FEC. This complaint focused on the commission’s failure to adopt a regulation related to the financial activities of the tax-exempt organizations known as Section 527 committees. Section 527 committees are granted a tax exemption because they are defined under the Internal Revenue Code as political committees, since influencing elections is their

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major purpose. The lawsuit specifically focused on the question of whether certain 527s should be considered political committees for the purposes of federal campaign finance law and thus be subject to the federal contribution limits applicable to PACs. While this controversy was not directly related to BCRA, it arose from the dramatic increase in 527 activity that occurred in the aftermath of BCRA’s passage. Section 527 committees had spent $424 million in connection with federal elections in 2004, most of this money coming from unregulated contributions from individuals, labor unions, and corporations.50 These committees thus constituted the principal locus of unregulated money in the federal election process. Supporters of BCRA hoped to use the regulatory process to end this form of unlimited funding. The regulatory issue at the center of the dispute—how to define political committee for the purposes of federal campaign finance law—was a long-standing problem because of the use of differing standards and conceptions that had never been clearly resolved. The Federal Election Campaign Act defined a political committee as any committee or other group of persons that receives aggregate contributions connected to federal elections totaling more than $1,000 during a calendar year or makes expenditures totaling more than $1,000 during an election year.51 In Buckley v. Valeo, the Supreme Court determined that only expenditures that expressly advocated the election or defeat of a candidate were subject to the Federal Election Campaign Act’s restrictions and narrowed the definition of political committee to encompass only organizations that are under the control of a candidate or whose “major purpose” is to nominate or elect a candidate.52 How to determine a committee’s “major purpose” and whether only expenditures made expressly to advocate a candidate should be considered in determining political committee status had thus become a matter of debate for decades. In 2004 the FEC initiated a rule-making proceeding in response to the growth in 527 activity, but it ended the year without approving any new rules. Instead, the commission issued an “explanation and justification,” simply stating that it would determine whether an organization should be subject to federal political committee rules on a case-by-case basis in response to enforcement complaints filed against individual groups.53 Representatives Shays and Meehan went to court to try to force the FEC to establish a rule. The case, Shays v. Federal Election Commission (known as Shays II), was initially decided in district court in March 2006.54 The court noted

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that it was “troubled . . . by the FEC’s lack of explanation for its conclusion that adjudication is preferable to rulemaking for regulating 527 groups.”55 But it also felt that the circumstances were “not sufficiently compelling” to order the FEC to promulgate a 527 rule. Rather, the court directed the FEC to issue a further explanation and justification for its approach, which it did nearly a year later, publishing its explanation on political committee status on February 7, 2007.56 The plaintiffs filed a new motion in response to this revised explanation, but the court sided with the commission. Although it found fault with the FEC’s interpretation of the tests for political committee status and its approach in regulating 527s, the court felt the commission had met its obligation under the law, and it left it to the agency to determine whether to promulgate a new rule.57 While facing the Shays II litigation concerning the rules that it did not adopt for 527s, the FEC was also being sued for the regulations it did adopt. In November 2004, about two weeks after Election Day, the FEC published final rules related to the financial activity of political committees, effective January 1, 2005.58 The new rules sought to limit the role of soft money in federal elections by requiring more organizations to disclose their financial activity to the FEC. The rules also provided guidance to PACs on how to pay for activities financed with hard and soft money. Under the regulations, any funds received in response to a solicitation indicating that any portion of the money received would be used to support or oppose a clearly identified federal candidate would be considered a contribution to the group that issued the communication and would be subject to the restrictions of federal law. The FEC also decided that any activities sponsored by a political committee that could be financed with a combination of hard and soft money, such as voter registration efforts or get-out-the-vote drives, had to be paid for with at least 50 percent hard money. Before this, PACs or other political committees could pay for these activities with a lower proportion of hard money. In this instance, the regulations were challenged not by a conservative group but by an organization typically associated with Democrats and progressive causes. EMILY’s List, a federal PAC that assists prochoice candidates and finances some of its activities with hard- and soft-money funds, opposed the allocation rule that required certain activities to be financed with equal shares of hard and soft money. The PAC contended that the FEC had exceeded its authority by requiring that funds be considered federal contributions, even if they were to be used to finance nonfederal activities, and by mandating that federal funds be used in paying

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for nonfederal activities.59 The committee also argued that the new allocation rule would inhibit some of its fundraising and political activities and prohibit it from using some of the soft-money contributions it receives. The suit, EMILY’s List v. Federal Election Commission, was brought in January 2005.60 The committee sought an injunction against the rules, but the request was denied and the case wended its way through the courts. In July 2008 Judge Kollar-Kotelly of the district court issued the opinion in the case. She noted that EMILY’s List was registered as a political action committee with the assumed “major purpose” of influencing elections and thus differed from an organization like Wisconsin Right to Life. The opinion further stated that the types of activity that EMILY’s List financed with hard and soft money—for example, voter drives—were “mixed-purpose” activities that could influence both federal and nonfederal elections and thus were within the FEC’s regulatory purview.61 The court determined that the solicitation and allocation regulations served the government interest of preventing corruption or the appearance of corruption by foreclosing the possibility that a group might circumvent federal contribution limits. Accordingly, the court upheld the FEC rules. EMILY’s List appealed the decision, and it was taken up by the court of appeals. But the appellant court did not hear the case until after the 2008 election. Consequently, PACs and political committees had to finance their mixed-purpose activities, including voter registration drives, get-out-the-vote efforts, and any associated administrative costs, in equal parts hard money and soft money, a requirement that had not been in effect in 2004. Even if the major share of a PAC’s activities was focused on nonfederal elections, these committees still had to abide by the fifty-fifty rule. These groups were thus allowed to continue to use soft money but not to the extent that might have been possible in earlier elections. They still, however, held an advantage over national party committees, since the parties were barred by BCRA from using any soft money at all for their voter registration and turnout efforts. After the election, the Court of Appeals for the District of Columbia issued a final ruling in the case in September 2009.62 The court found that the FEC had exceeded its statutory authority, and it invalidated the regulations imposed on EMILY’s List. In the view of the court, the FEC did not have the authority to require a nonprofit entity such as EMILY’s List to use federally regulated hard money to pay for activities that are not considered

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federal election activity. Specifically, the court noted that in considering the regulation of an organization like EMILY’s List for purposes of First Amendment analysis, it had to decide whether the committee was comparable to an individual—and thus had the right to spend unlimited amounts in support of a candidate—or comparable to a party—and thus did not have the right to raise and spend unlimited soft money. The court determined that nonprofit groups “do not have the same inherent relationship with federal candidates and officeholders that political parties do.”63 A nonprofit that makes contributions to a candidate or party would have to use regulated funds to make a contribution, since in this instance a limit is justified by the government interest in safeguarding against corruption. But the use of unregulated funding to pay for other election-related expenditures does not pose a risk of corruption and should not be subject to contribution limits. The court therefore decided that EMILY’s List—or any other nonprofit entity—may accept unlimited donations and use these funds to pay for “election-related activities such as advertisements, get-out-the-vote efforts, and voter registration drives.”64 It therefore invalidated the FEC allocation rules. Accordingly, in future elections groups will not have to pay for such generic activities (so long as they did not promote or oppose a specific candidate) with a share of hard money. Instead, such activities could be wholly funded with unlimited soft money.

Federal Election Commission Activity As this litigation review indicates, the FEC faced a heavy workload in the 2008 election cycle. But many of the tasks it was responsible for performing were left unfinished in 2008, owing to a breakdown in the FEC’s ability to enforce and administer the law, a breakdown that even its sharpest critics failed to foresee. For the six-member commission to conduct official business, four votes are necessary. But the protracted controversy in the Senate over FEC appointments left the commission with only two commissioners for the first six months of 2008. This meant that the commission was unable to exercise its regulatory responsibilities. It could not conduct rule-making procedures, issue authoritative advisory opinions addressing queries from members of the regulated community, or initiate enforcement actions. The wrangling over appointments thus delayed the completion of many of the pressing tasks the commission confronted.

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The Appointments Controversy In December 2005 President Bush had avoided a stalemate on FEC nominations by using recess appointments to fill three of the six positions on the commission. He appointed Republican Hans von Spakovsky, an attorney in the civil rights division of the Department of Justice, and Democrats Robert Lenhard, a former counsel for the American Federation of State, County, and Municipal Employees, and Steven Walther, an attorney from Nevada supported by Senator Harry Reid. These members began serving on the commission on January 4, 2006.65 A fourth commissioner, Republican David Mason, who was first appointed in 1998, continued on the commission as a holdover appointment with no definite end of service.66 The recess appointments were due to expire at the end of 2007. Bush nominated the three recess appointees and sitting commissioner Mason for new terms, and the Senate Rules Committee planned to take up the nominations in the spring of 2007. The Senate therefore had to act on four nominations. In addition, in March 2007 Commissioner Michael Toner resigned from the FEC, creating an open slot.67 This left Ellen Weintraub as the only commissioner whose term was not entangled in the controversy. As a matter of practice, the Senate had traditionally voted on FEC appointments in pairs, with the Democrats agreeing to support the Republican nominee, and the Republicans supporting the Democrat. In other words, each party as a matter of practice consented to accept the other’s nominee. But this consensual approach fell apart in 2007. The controversy was provoked by the nomination of Hans von Spakovsky. During his tenure at the Department of Justice, von Spakovsky had supported the 2003 Texas redistricting plan advocated by former Republican majority leader Tom Delay and approved a new voter identification law in Georgia. Both actions were opposed by voting rights advocates and many Democrats; they therefore opposed von Spakovsky’s nomination and mounted a campaign to prevent his appointment.68 The chorus of opposition rose throughout 2007, groups including the NAACP, the Leadership Conference on Civil Rights, and the Mexican American Legal Defense and Educational Fund weighing in against the nomination.69 Senator Mitch McConnell led the Republicans in defending von Spakovsky, insisting that his nomination be voted on as part of a package

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including the other three nominees. The Democrats refused, seeking a separate vote on von Spakovsky. Consequently, the Senate faced a deadlock, which meant that from March 2007 until the end of December, the commission had only five members (Toner not having been replaced), and when the term of the recess appointments ended on December 31, only two commissioners remained—Democrat Ellen Weintraub and Republican David Mason. While the commission still had an operative number of members in December, it adopted a procedural directive that would allow it to continue to perform some of its basic administrative and disclosure responsibilities and provide informal guidance to candidates and others.70 But it could not act on regulatory matters, including the remaining BCRA regulations, advisory opinions, and enforcement actions.71 The impasse was not resolved until the middle of the election year. In May 2008, President Bush submitted a new slate of three nominees. Democrat Cynthia Bauerly, a legislative director for Senator Charles Schumer, was nominated to replace Lenhard, who had withdrawn from nomination to pursue private practice rather than wait for a resolution of the appointments deadlock. Republican Caroline Hunter, vice chair of the U.S. Election Assistance Commission and a former counsel at the Republican National Committee, was named to replace Toner. And in a decision that was criticized by Democrats and campaign finance watchdog groups, Commissioner Mason’s nomination was withdrawn and he was replaced with Donald McGahn, an attorney for the National Republican Congressional Committee.72 The White House also indicated that it would be willing to allow separate votes on each nominee.73 Soon thereafter, the White House confirmed that von Spakovsky had withdrawn his name for consideration for a full term on the commission.74 His withdrawal cleared the way for the Senate to proceed. Bush named Matthew Petersen, Republican chief counsel to the Senate Committee on Rules and Administration, as his new nominee. The Senate confirmed all five nominees (Walther, Bauerly, Hunter, McGahn, and Petersen) on June 24, who joined Weintraub to reconstitute the commission.75 The FEC resumed its operations, but the disruption caused by the appointment battle ensured that many of the regulatory issues would not be addressed until after the 2008 election. The FEC, of course, was able to conduct official business before its sixmonth hiatus. It rendered decisions on two aspects of campaign finance—

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Section 527 organizations and hybrid advertising—that had a material effect on the financial activity that took place in 2008. The commission’s actions in these areas thus merit particular notice.

Section 527 Enforcement Actions As noted earlier, the FEC chose not to adopt rules on political committee status to try to rein in Section 527 organizations. Instead, the commission decided to rely on its compliance and enforcement procedures to pursue case-by-case examinations of 527 committees. In 2006 the FEC began to announce the results of its efforts, which were initiated in response to complaints alleging violations of the law by specific Section 527 committees in the 2004 election. The announcement of settlements with these Section 527 committees continued throughout 2007. The FEC resolved a large number of enforcement actions in 2006. In all, the commission closed 315 matters, the most FEC activity since 2001. It also imposed higher penalties than ever before. The commission collected civil fines of more than $6.2 million in 2006 alone, which more than doubled the total penalties levied in any other year in the agency’s history. This included twelve cases in which the imposed penalty was more than $100,000. These twelve cases represented one of every four cases involving a penalty of at least $100,000 decided by the commission since it was established in 1975.76 Many of the largest fines were imposed on Section 527 committees active in the 2004 presidential election. These fines were negotiated in settlement agreements between the FEC and each committee, agreements that were designed to resolve an enforcement matter without having to go to court. As noted by Paul Ryan of the Campaign Legal Center, the FEC de termined in most of these cases that a Section 527 committee had engaged in activities that expressly advocated the election of a federal candidate or had solicited funds in a way that qualified the monies received as contributions under the rules adopted by the FEC. In some cases, the commission determined that an organization’s major purpose was to influence the election, which, in the case of 501(c) nonprofits, meant that the organization had violated the strictures of its tax status.77 The commission imposed fines on numerous 527 groups, including those that had been most active in the 2004 election.78 For example, it concluded that Swift Boat Veterans and POWs for Truth, a group that in 2004 aggressively criticized Senator Kerry’s military record, had violated

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the law by failing to register as a political committee and abide by federal contribution limits. The Swift Boat Veterans agreed to pay a penalty of $299,500 to settle the case. Similarly, the League of Conservation Voters was found to have been in violation of the political committee rules and agreed to pay a fine of $180,000. MoveOn.org, the liberal advocacy group that opposed President Bush, was fined $150,000 for receiving contributions from solicitations that indicated that the funds would be used to defeat George Bush and thus qualified as funds that required registration as a federal political committee subject to the contribution limits. The biggest fines were assessed against groups whose activities were especially prominent in the 2004 campaign. In August 2007 the FEC collected a fine of $775,000 from America Coming Together, and in November the Media Fund agreed to pay $580,000 to settle a complaint filed against its activities. These two 527s spent tens of millions of dollars in 2004 in their efforts to defeat President Bush, and their actions spurred the surge in 527 activity that became a hallmark of the 2004 presidential race.79 On the other side of the political spectrum, the conservative Progress for America Voter Fund agreed to pay $750,000 for its failure to register as a political committee in 2004. The FEC hoped that these actions would clarify the kinds of activities that were not permissible, and it indicated that significant penalties would be imposed on those who violated the law in the future.80 Even so, the commission was widely criticized for not taking a tougher stance. As advocates of stricter regulation of 527s noted, the fines represented a small fraction of the expenditures or contributions that the FEC determined to be in violation of the law and an even smaller fraction of the total monies raised and spent by these committees. The fines thus represented little more than a cost of doing business and were unlikely to deter 527s from spending large sums in future races.81 The FEC’s efforts thus produced no major regulatory changes with respect to 527 committees. While its enforcement proceedings identified certain actions that would trigger contribution limits and other restrictions, the FEC took no actions that would significantly impede 527s from engaging in election-related activity and paying for many of these activities with unlimited contributions. The rules that were established (which were being challenged in court by EMILY’s List) at best made clear that groups could not mention federal candidates in their fundraising solicitations and that certain activities had to be financed in part with hard money. Otherwise, Section 527 committees were free to use unlimited

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contributions and expenditures in ways that would best serve their political preferences and interests—just as they had in 2004 and 2006.

Hybrid Advertising In the 2004 presidential general election, candidates and party committees sought to ease the restrictions of the public funding spending limits by engaging in a new tactic: hybrid advertising.82 Both President Bush and his challenger, Senator John Kerry, financed advertising campaigns jointly with their national party committees, the candidates paying part of the expenses out of their limited general election public funds and the parties paying the other share. This tactic relied on the allocation rules established by the FEC that permitted candidates and party committees, or multiple candidates, to share the costs of telephone banks and mass mailings that benefited a party and one or more candidates.83 The tactic was clearly designed to circumvent the public funding spending limits, and whether the FEC would permit this evasion was uncertain at the time it was first employed in 2004. When the commission considered the postelection audit of President Bush’s campaign in March 2007, the Democratic commissioners, citing the hybrid advertising expenditures, argued that the president had violated the law and had received up to $42 million in prohibited funding from the Republican National Committee. The Republican commissioners contended that the practice was permissible under FEC allocation precedents. The commission, therefore, divided along party lines (three-to-three) on the legality of the Bush– Republican National Committee funding.84 The final audit report adopted mentioned the legal dispute but did not find any violation of the law and did not order any repayment of public funds, the penalty typically imposed on publicly funded candidates for violating the rules. Similarly, when the Kerry audit report was considered in May 2007, FEC staff suggested that the hybrid expenditures represented an excessive contribution by the party to the campaign. But the commissioners again found no violation of the law, given the decision on Bush’s spending.85 Since the regulations do not specifically mention the allocation of costs for hybrid ads, the FEC initiated a rule-making process on the subject in May 2007. The commission proposed new rules to determine the formula for sharing costs and describe how these expenditures should be treated under the contribution and coordinated party spending limits.86 But the rule-making never progressed past the initial hearing stage. Thus in 2008

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candidates and parties were once again allowed to jointly finance hybrid communications, the costs shared equally by a party and a candidate. Unlike in 2004, however, they could do so with the assurance that they would not be penalized by the FEC.

The Legislative Arena The 2004 election brought into high relief two problems in the campaign finance system—the breakdown of the presidential public funding program and the unregulated financial activities of Section 527 organizations. But Congress failed to address either of these concerns in advance of the 2008 election cycle. Legislators showed little interest in taking on reform of the public funding system. Any public funding proposal would face strong opposition from Republicans, which made its passage unlikely. However, Congress did give some consideration to proposals to restrict contributions to 527 committees. These proposals would have defined Section 527 groups involved in national elections as political committees subject to FEC regulation and to the contribution limit of $5,000 a year applicable to federal PACs. The House passed a bill in April 2006, which was backed by the Republican majority (only seven Democrats joined the 211 Republicans voting for the plan).87 Republicans supported the proposal largely because it included a provision that would have eliminated the ceiling on party-coordinated spending, which would have permitted the parties to spend unlimited amounts in coordination with their candidates. But the reform gained little traction in the Senate and did not come up for a vote. Congress also evinced no desire to revisit the debate over BCRA, although it did make one minor change in the law immediately after the 2004 election by means of an appropriations bill. Before the adoption of BCRA, a member of Congress or a candidate for any federal office could make a contribution of $1,000 to another candidate from his or her campaign committee. This limit was not changed when the individual contribution limits were increased under BCRA. A provision was inserted in the Consolidated Appropriations Act of 2005 to raise this contribution limit to $2,000.88 The act also amended the language in BCRA regarding the “permissible uses” of a candidate’s campaign funds to include donations to state and local candidates, subject to the limits and prohibitions of

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state law, as well as “any other lawful purpose” allowed under BCRA, provided the funds were not converted to “personal use” by the candidate.89 In other words, Congress used the appropriations bill to increase the amount that they could contribute to other federal candidates and ensure their ability to make contributions to state and local candidates, should they so choose. This change was adopted without debate or controversy because it served the interest of members of Congress. In recent elections, members on both sides of the aisle in both houses of Congress have worked with their parties to assist candidates in the battle for majority control of the House and Senate. As part of this coordinated electoral strategy, members of Congress, particularly incumbents, have helped raise money for the party campaign committees and their fellow partisans seeking office. The principal way they do this is by making contributions to the party and to individual candidates from their personal campaign committees or leadership PACs.90 Between the 1990 and 2006 congressional elections, the number of politicians who used their campaign committees to make contributions to other candidates grew from 362 to 593, and the total amount contributed to House and Senate candidates rose from $1.7 million to $15.6 million.91 By changing the contribution limit applicable to campaign committees, members doubled the amount that they could give to another candidate. The change thus allowed members, especially safe incumbents with well-funded campaign accounts, to give more money to other candidates, especially those running in competitive seats. Congress also passed a major ethics and lobbying reform law, the Honest Leadership and Open Government Act, which President Bush signed into law on September 14, 2007. The legislation, adopted in the wake of scandals associated with Republican lobbyist Jack Abramoff as well as a number of unrelated scandals involving individual members of Congress, put into place an array of regulations designed to strengthen public disclosure and reduce the influence of lobbyists in the political process. These included restrictions on gifts and lobbyist-funded private travel for members of Congress and their staffs, more stringent revolvingdoor rules on lobbying after leaving government service, and procedures to enhance the transparency of special-project earmarks in legislation and holds on Senate floor action. Although not specifically focused on campaign financing, the law did include provisions that apply to the financial activity that takes place in federal elections, especially with respect to the

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disclosure requirements imposed on registered lobbyists.92 First, the law required lobbyists to file semiannual reports with the secretary of the Senate and clerk of the House, disclosing contributions made by a lobbyist, a lobbyist’s employer, or an affiliated PAC to a member of Congress, a congressional candidate, a leadership PAC, or a political party that exceeded an aggregate of $200. The Federal Election Campaign Act already required the disclosure of such contributions but allowed the individuals or entities making these contributions to file them in separate disclosure reports. The Honest Leadership and Open Government Act required lobbyists to compile the diverse contributions from associated interests and report them in a unified disclosure, as a means of increasing the transparency of the funding provided by these interests. The law also expanded disclosure to include financial transactions not covered under Federal Election Campaign Act rules, including any payments made to a member or to an entity controlled or named after a member, any expenditures made to pay for events to honor or recognize a member or to finance a meeting or retreat held by members, as well as any donations to a presidential library foundation or inaugural committee exceeding $200. Finally, the Honest Leadership and Open Government Act required lobbyists to disclose “bundled” contributions; that is, any contributions raised or received by a lobbyist from other individuals that are bundled together and donated to a candidate, party committee, or leadership PAC. Under the new rules, a lobbyist must file a semiannual disclosure report with the FEC, noting the donor information for all bundled contributions that exceed $15,000 in the aggregate in a six-month period. This requirement was designed to make transparent the contributions raised or received by a lobbyist, so as to provide a clearer picture of any fundraising activities undertaken in addition to their own contributions. These bundling regulations, which were a major objective of groups advocating lobby law reform, were to take effect three months after the FEC promulgated regulations to implement the rules. The statute called for this to be done within six months of the Honest Leadership and Open Government Act’s enactment. But owing to the lack of a quorum at the FEC, the rules were not implemented until after the 2008 election.93 Consequently, although there was speculation that lobbying activity would pick up in anticipation of the new law, the act’s requirements seem to have had no effect on the financial activity in the 2008 election cycle.

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Conclusion Efforts to regulate campaign finance experienced a period of retrenchment after the 2004 election. As a result, the 2008 election was conducted under a weaker regulatory structure than the one in place in 2004. The implementation of BCRA and the effect of its restrictions continued to be a source of controversy, but the regulatory battle that began in Congress in 2002 shifted to the courts and the FEC, where advocates of stringent campaign finance regulation faced increasingly difficult odds. Although the lower courts continued to support BCRA’s restrictions, a change in the membership of the Supreme Court led to a change in the majority’s opinion on campaign finance reform. The high court moved away from broad conceptions of the governmental interest justifying regulation and the means needed to ensure the efficacy of law to an emphasis on the protection of First Amendment rights and the burdens imposed by regulation. Consequently, the slim majority that had upheld BCRA only a few years earlier gave way to a slim majority more favorable to the right of political speech than to the regulation of campaign money. The regulatory developments in the 2008 election cycle highlighted the role of the courts in determining the scope of campaign finance laws. It also demonstrated the fragility of the current regulatory structure. Changes in the membership of the Court, combined with the inefficacy of the agency responsible for enforcing campaign finance law, led to a new outlook on regulation and produced major changes in the law. The courts reduced the stringency of federal regulations, while the FEC generally sanctioned new practices that emerged to circumvent the law. This shift in the legal environment indicated the beginning of what may prove to be a new era of jurisprudence on campaign finance and the end of a period of campaign finance reform aimed at expanding regulation and strengthening the limits imposed on the monies used in federal elections. The judicial decisions issued after McConnell negated many recent reforms. With respect to BCRA, only the disclosure requirements for electioneering communications and the ban on party soft money remained. The Bipartisan Campaign Reform Act’s restrictions on the sources of funding for electioneering communications, the Millionaires Amendment, the provision requiring parties to choose between independent or coordinated expenditures, and the ban on contributions by minors had all been struck down. The ban on corporate and labor union expenditures that had been in effect for decades and had served as a foundation for BCRA’s restraints

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had also been deemed unconstitutional. Thus in future elections, corporations and labor unions would be able to finance advertising and other election activities from their own treasuries, and independent groups would be able to use corporate and labor union funds to finance election advertising, no matter when the ads were broadcast. The overall effect of these changes was to move the law in a direction that favored independent campaigning by organized groups, which were allowed to finance election activity under more permissible rules than those applied to candidates and party organizations. Most notably, organized groups or corporations, regardless of whether they were nonprofit or for-profit corporations, could use unlimited contributions to finance activities other than direct contributions to candidates and parties, while the candidates and parties were subject to strict contribution limits. What is more, new challenges continued to be filed. Among the most important was a complaint filed by the Republican National Committee in November of 2008, in Republican National Committee v. Federal Election Commission, challenging the constitutionality of BCRA’s ban on party soft money. The suit contends that the party has a constitutional right to raise and spend soft money in state and local elections, as well as for other nonfederal activities, such as redistricting efforts.94 Another suit, Cao v. Federal Election Commission, was filed in December 2008 by Republican representative Anh “Joseph” Cao, who was joined by the Republican National Committee and the Republican Party of Louisiana in a complaint challenging the constitutionality of the party-coordinated spending limits.95 Finally, SpeechNow.org, a nonprofit, unincorporated association organized under Section 527 of the Internal Revenue Code, has filed a challenge against Federal Election Campaign Act provisions governing political committee registration, contribution limits, and disclosure. The group was formed to make only independent expenditures that advocate the election or defeat of federal candidates, and it accepts only individual contributions. The group contends that the law impermissibly restricts an individual’s freedom of speech by limiting the amount that may be contributed to the group.96 The 2008 election thus ended much as it began—with major challenges to the validity of federal campaign finance regulations and deepening questions as to whether BCRA will accomplish any of the purposes it was designed to achieve. Whether these recent judicial and administrative decisions mark a permanent new path with respect to regulation remains

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to be seen. What is certain is that the regulatory developments in 2008 did not resolve the disputes over campaign finance regulation. Instead, they ensured that the debate would continue for some time to come.

Notes 1. McConnell v. Federal Election Commission, 540 U.S. 93 (2003). For a brief summary of the case, see Anthony Corrado, “The Regulatory Environment: Uncertainty in the Wake of Change,” in Financing the 2004 Election, edited by David B. Magleby, Anthony Corrado, and Kelly D. Patterson (Brookings, 2006), pp. 30–67, 43–45. 2. See “Samuel A. Alito, Jr., Biography,” Oyez Project, 2009 (www.oyez.org/ justices/samuel_a_alito_jr). 3. Ibid. 4. Kenneth P. Doyle, “Persistent Attacks on Campaign Regulation on Track to Be Considered by Supreme Court,” Bureau of National Affairs Money and Politics Report, December 11, 2008. 5. For a summary of the provisions, see Corrado, “The Regulatory Environment,” pp. 40–42. For a discussion of the effect of the law, see Jennifer A. Steen, “Self-Financed Candidates and the ‘Millionaires’ Amendment,’” in The Election after Reform: Money, Politics, and the Bipartisan Campaign Reform Act, edited by Michael J. Malbin (Lanham, MD: Rowman and Littlefield, 2006), pp. 204–17. 6. Davis reported having spent $1.2 million, principally his own funds, in 2004. He spent $2.3 million in 2006, all but $126,000 coming from his own funds. Davis v. Federal Election Commission, 128 S. Ct. 2759 (2008), 4. All page citations are to the slip opinion. 7. Ibid., pp. 11–12. 8. Ibid., pp. 12, 12–13, 14, 15, emphasis in original. 9. Federal Election Commission, “Public Statement on the Supreme Court’s Decision in Davis v. FEC,” press release, July 25, 2008 (www.fec.gov/press/ press2008/220080725millionaire.shtml [January 2010]). 10. Kenneth P. Doyle, “FEC Drops Cases against Davis, Others Said to Violate Millionaires’ Amendment,” Bureau of National Affairs Money and Politics Report, September 24, 2008. 11. The provisions related to electioneering communications are found in Section 203 of the act, Public Law 107-155, 116 Stat. 81. See 2 U.S.C. 441b. 12. The facts in this case as presented in the following paragraphs are drawn from the discussion in Wisconsin Right to Life, Inc. v. Federal Election Commission and Senator John McCain, et al., No. 04-1260 (D.D.C. 2006), 1–6. 13. Ibid., pp. 39–41. 14. McConnell v. FEC, 190, n. 73.

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15. Wisconsin Right to Life, Inc. v. FEC and Sen. John McCain, 6, 7. 16. Wisconsin Right to Life, Inc. v. Federal Election Commission (WRTL I), 546 U.S. 410, 412 (2006). 17. Wisconsin Right to Life, Inc. v. FEC and Sen. John McCain, 22, 26. 18. Federal Election Commission v. Wisconsin Right to Life, Inc. (WRTL II), 127 S. Ct. 2652 (2007), 551 U.S. 449 (2007). 19. McConnell v. FEC, 205–06. 20. Federal Election Commission v. Wisconsin Right to Life, Inc., 551 U.S. 449, 468, 469–70, 457 (2007). 21. Ibid., 536 (Souter, J., dissenting). 22. Ibid., 482–83 (Alito, J., concurring). 23. Adam Liptak, “‘Hillary: The Movie’ Tests Campaign Finance Law,” New York Times, March 6, 2009, p. A12; Warren Richey, “Now Showing: ‘Hillary: The Movie’ and Election-Law Gripes,” Christian Science Monitor, February 1, 2008 (www.csmonitor.com/USA/Society/2008/0201/p03s01-ussc.html [January 2009]). 24. See 11 C.F.R. 114.15. The revised electioneering communications were added to the regulations on December 26, 2007. See Federal Register 72, no. 246, December 26, 2007, p. 72899–915. 25. Citizens United v. Federal Election Commission, No. 07-2240, Memorandum Opinion (D.D.C. 2007), 8, 7. 26. Brief for Appellant, Citizens United v. Federal Election Commission, U.S. Supreme Court, No. 08-205 (2008), 34–41. 27. Ibid., 54. 28. Austin v. Michigan Chamber of Commerce, 494 U.S. 652, 660 (1990). 29. Brief for Appellant, Citizens United v. FEC, U.S. Supreme Court, No. 08205 (2008), 13–14. 30. A copy of the order for reargument issued by the Supreme Court on June 29, 2009, can be found in the materials on Citizens United v. FEC available at Campaign Legal Center (www.campaignlegalcenter.org/attachments/Court_ Cases_Of_Interest/2025.pdf ). In the quotation that appears in the text, citations have been omitted. 31. Anthony Corrado, “Money and Politics: A History of Federal Campaign Finance Law,” in The New Campaign Finance Sourcebook, edited by Anthony Corrado and others (Brookings, 2005), pp. 7–47, 17. 32. Kenneth P. Doyle, “Lawyers for McCain, McConnell to Join Extended Oral Argument in Citizens United,” Bureau of National Affairs Money and Politics Report, August 19, 2009. 33. Citizens United v. Federal Election Commission, 558 U.S. ____ (2010), 7–8. All page citations are to the slip opinion. 34. Ibid., 24, 26. 35. Ibid., 42.

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36. Ibid., 34, internal citation omitted. 37. First National Bank of Boston v. Bellotti, 435 U.S. 765 (1978). 38. Citizens United v. FEC, 558 U.S. ____ (2010), 31, 33. 39. Ibid., 6 (Roberts, C. J., concurring), 7, 8. 40. Citizens United v. FEC, 558 U.S. ____ (2010), 52–53. 41. Kenneth P. Doyle, “Obama Criticizes Supreme Court Ruling, Urges Action on Campaign Finance, Lobbying,” Bureau of National Affairs Money and Politics Report, January 29, 2010; Greg Stohr, “Obama Foreign-Business Court Slam on Foreign Electioneering Hints at Next Clash,” Bloomberg News, January 29, 2010 (www.bloomberg.com/apps/news?pid=newsarchive&sid=ajza4HU8sP2g [August 2010]). 42. Kenneth P. Doyle, “Ban on Corporate, Union Campaign Money Swept Aside by 5-4 Supreme Court Decision,” Bureau of National Affairs Money and Politics Report, January 22, 2010. 43. Democracy 21, “Supreme Court Decision in Citizens United Case Is Disaster for American People and Dark Day for the Court: Statement of Fred Wertheimer,” press release, January 21, 2010; Campaign Legal Center, “In Citizens United, Roberts Court Ignores Precedent and Judicial Restraint: Statement of J. Gerald Hebert,” press release, January 21, 2010. Copies of these releases are in the possession of the author. 44. Quoted in Doyle, “Ban on Corporate, Union Campaign Money Swept Aside.” 45. Hans von Spakovsky and John Park, “Campaign Speech Free at Last,” Human Events, January 28, 2010 (www.humanevents.com/article.php?id=35368 [August 2010]). 46. For a discussion of the implementation controversy in 2004, see Corrado, “The Regulatory Environment,” pp. 45–58. 47. Amy Kort, “Court Cases,” FEC Record 30, no. 11 (November 2004), p. 2. 48. Shays v. Federal Election Commission, 337 F. Supp. 2d 28 (D.D.C. 2004). 49. Shays v. Federal Election Commission, U.S. Court of Appeals for the District of Columbia Circuit, No. 07-5360 (2008), 2–3, 19, 37, 19. 50. Steven R. Weissman and Ruth Hassan, “BCRA and the 527 Groups,” in The Election after Reform, edited by Malbin, p. 81. 51. Public Law 92-225, 92nd Cong., 2nd sess. (February 7, 1972), 86 Stat. 3. 52. Buckley v. Valeo, 424 U.S. 1, 79 (1976). For an authoritative discussion of the regulatory controversy regarding Section 527 organizations, see Paul S. Ryan, “527s in 2008: The Past, Present, and Future of 527 Organization Political Activity Regulation,” Harvard Journal on Legislation 45 (Summer 2008), pp. 471–506. 53. Kenneth P. Doyle, “Judge’s Decision Could Force FEC to Consider New Rules for 527 Groups,” Bureau of National Affairs Money and Politics Report, March 31, 2006. 54. Shays v. Federal Election Commission, 424 F. Supp. 2d 100 (D.D.C. 2006).

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55. Ibid., 116. 56. “Federal Election Commission: Political Committee Status,” Federal Register 72, no. 25 (February 7, 2007), p. 5595. 57. Shays v. Federal Election Commission, 511 F. Supp. 2d 19, 30–31 (D.D.C. 2007); Ryan, “527s in 2008,” pp. 499–500. 58. “Final Rules on Political Committee Status,” FEC Record 30, no. 12 (December 2004), pp. 1–3. See 11 C.F.R. 100.57. 59. Federal Election Commission, “EMILY’s List v. FEC: Case Summary” (www.fec.gov/law/litigation/emilyslist_08.shtml#summary [January 2010]). 60. EMILY’s List v. Federal Election Commission, No. 05-0049 (D.D.C. 2005). 61. EMILY’s List v. FEC, Memorandum Opinion, No. 05-0049 (D.D.C. 2008), 45. 62. EMILY’s List v. Federal Election Commission, U.S. Court of Appeals for the District of Columbia Circuit, No. 08-5422 (2009). 63 Ibid., 22. 64 Ibid., 23. 65. Federal Election Commission, “New FEC Commissioners Take Office,” press release, January 9, 2006 (www.fec.gov/press/press2006/20060106members.html [January 2010]). This release is noted as January 6, 2006, on the FEC press release list but dated for release on January 9. 66. Kenneth P. Doyle, “Senators Discuss Conditions for Vote on von Spakovsky, Other FEC Nominees,” Bureau of National Affairs Money and Politics Report, October 4, 2007. 67. Federal Election Commission, “Toner Departs Federal Election Commission,” press release, March 14, 2007 (www.fec.gov/press/press2007/20070314 Toner.shtml [January 2010]). 68. See, for example, J. Gerald Hebert, “So Exactly Where Were You, Hans von Spakovsky, on the Nights in Question?” Campaign Legal Center Blog, February 20, 2007 (www.clcblog.org/blog_item-109.html [January 2010]). 69. Campaign Legal Center, “Chorus against von Spakovsky Continues to Grow,” Campaign Legal Center Blog, December 14, 2007 (www.clcblog.org/blog _item-200.html [January 2010]). 70. “Rules of Procedure,” Federal Register 73, no. 20 (January 30, 2008), pp. 5568–70. 71. Emily Cadei and Alex Knott, “Lots of Work Ahead for Election Commission When It Gets to Full Strength,” CQ Politics, June 13, 2008 (www.cqpolitics. com/wmspage.cfm?docID=news-000002897309 [January 19, 2010]); Eliza Newlin Carney, “Remember the Federal Election Commission?” National Journal, February 12, 2007 (www.nationaljournal.com/members/buzz/2007/rules/ 021207 .htm [January 2010]). 72. Michael Luo, “Amid Partisan Standoff, Bush Submits 3 Nominees to Election Commission,” New York Times, May 7, 2008, p. A22.

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73. Ibid. 74. “Embattled FEC Nominee Withdraws,” CQ Roll Call, May 16, 2008 (www.rollcall.com/news/25208-1.html?user_id=80042570 [January 2010]). 75. Federal Election Commission, “New FEC Commissioners Assume Office; Will Hold First Open Meeting on July 10,” press release, July 8, 2008 (www.fec. gov/press/press2008/20080708meeting.shtml [January 2010]). 76. Federal Election Commission, “FEC Posts Record Year, Collecting $6.2 Million in Civil Penalties,” press release, December 28, 2006 (www.fec.gov/ press/press2006/20061228summary.html [January 2010]). 77. Ryan, “527s in 2008,” pp. 491–93. 78. Unless otherwise noted, the examples of fines assessed by the FEC are drawn from the detailed discussion in Ryan, “527s in 2008,” pp. 493–96. 79. See Weissman and Hassan, “BCRA and the 527 Groups,” pp. 85–87. 80. FEC, “FEC Posts Record Year, Collecting $6.2 Million in Civil Penalties.” 81. Ibid. 82. For a discussion of hybrid advertising in 2004, see Anthony Corrado, “Financing the 2004 Presidential General Election,” in Financing the 2004 Election, edited by Magleby, Corrado, and Patterson, pp. 138–39. 83. See 11 C.F.R. 106.1. 84. Kenneth P. Doyle, “FEC Audit Orders No Bush Repayment; Dems Say Limit Breached by $42 Million,” Bureau of National Affairs Money and Politics Report, March 23, 2007. 85. Kenneth P. Doyle, “FEC Reduces Kerry Campaign Repayment; Audit Findings Could Be Reduced Further,” Bureau of National Affairs Money and Politics Report, June 1, 2007. 86. ”Notice of Proposed Rulemaking for Hybrid Communications,” FEC Record 33, no. 6 (June 2007), pp. 1–4. 87. Tory Newmyer, “House Passes 527 Bill; Lobby Measures Modified, but Critics Want More,” CQ Roll Call, April 6, 2006 (www.rollcall.com/issues/51_ 107/news/12835-1.html [January 2010]); Kenneth P. Doyle, “Legislation Narrowly Clears House to Set Limits on Section 527 Groups,” Bureau of National Affairs Money and Politics Report, April 6, 2006. 88. Amy Kort, “Legislation,” FEC Record 31, no. 1 (January 2005), p. 1. 89. Ibid., p. 2. 90. Anne H. Bedlington and Michael J. Malbin, “The Party as Extended Network: Members Giving to Each Other and to Their Parties,” in Life after Reform, edited by Michael J. Malbin (Lanham, MD: Rowman and Littlefield, 2003), pp. 121–37. 91. Paul S. Herrnson, “The Roles of Party Organizations, Party-Connected Committees, and Party Allies in Elections,” Journal of Politics 71, no. 4 (2009), pp. 1207–27, 1211.

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92. The Lobbying Disclosure Act of 1995 requires individuals to register as lobbyists if they meet the definition set forth in the law. According to the law, “the term ‘lobbyist’ means any individual who is employed or retained by a client for financial or other compensation for services that include more than one lobbying contact, other than an individual whose lobbying activities constitute less than 20 percent of the time engaged in the services provided by such individual to that client over a three-month period.” See Public Law 104-65, 104th Cong., 1st sess. (December 19, 1995), 109 Stat. 691. 93. The FEC adopted regulations implementing the bundling disclosure provision on February 3, 2009, the new rules set to take effect on March 17, 2009. See Federal Election Commission, “FEC Finalizes Disclosure Requirements for Contributions Bundled by Lobbyists, Registrants, and Their PACs,” press release, February 3, 2009 (www.fec.gov/press/press2009/20090203BundlingEJ.shtml [January 2009]). 94. Republican National Committee v. Federal Election Commission, No. 081953 (D.D.C. 2010). 95. Federal Election Commission, “Ongoing Litigation: Ahn “Joseph” Cao, Republican National Committee, and Republican Party of Louisiana v. FEC” (www.fec.gov/law/litigation/cao.shtml [January 2010]). 96. Federal Election Commission, “Ongoing Litigation: Speechnow.org v. FEC” (www.fec.gov/law/litigation/speechnow.shtml [January 2010]).

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Financing the 2008 Presidential Nomination Campaigns john c. green and diana kingsbury

T

he 2008 elections shattered numerous federal campaign finance records, and the presidential nomination campaigns led the way. Barack Obama’s nomination fundraising was extraordinary, surpassing records set by the leading candidates in 2004 and 2000. However, the financial activity of many other candidates and interest groups was also large by recent standards.1 Indeed, the fundraising successes of Obama and his chief rival, Hillary Clinton, were a major factor in the unusual length and intensity of the Democratic nomination campaign. All told, more than $1.2 billion was raised by presidential hopefuls during the nomination phase of the election, almost twice the amount raised by all candidates in 2004 and more than three times the amount in 2000. These record-setting sums reflect a mix of special factors in 2008 as well as the culmination of recent trends in presidential nomination politics. The special factors included highly competitive nomination races, the unpopularity of George W. Bush, and the special skills of Barack Obama. Among the culminating trends were the front-loading of the nomination contest calendar, the expansion of online fundraising, and the forgoing of public funds by the most competitive candidates. In part, these results reveal innovations in presidential finance that were a part of what the journalist Ronald Brownstein has dubbed “the first true 21st century campaign.”2 At the same time, they may have been a requiem for the public financing system that has characterized presidential politics since 1976.

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Rules, Rivals, and Resources As in the past, the federal campaign finance laws, the structure of competition, and the availability of resources all help account for the financial patterns in 2008. On the first count, the 2008 nomination campaigns faced an evolving legal structure based on recent reforms, FEC rulings, and court decisions. On the second, the candidates in both parties were involved in highly competitive races. And on the third count, innovations in the technology of fundraising increased the scope and sources of available funds.

Federal Campaign Finance Laws In 2008 presidential campaign finance was governed by the Bipartisan Campaign Reform Act of 2002 (BCRA) and the Federal Election Campaign Act of 1971 (FECA) as amended in 1974, 1976, and 1979, as interpreted by the federal courts, and as implemented by the Federal Election Commission (FEC).3 The result was two sets of rules: mandatory regulations that applied to all presidential candidates and contingent regulations that applied only to those candidates who chose to participate in a public financing system. The mandatory rules in 2008 differed somewhat from those in the past. For one thing, the maximum individual donation to a candidate was adjusted for inflation to $2,300 per election (a maximum of $4,600 for the primary and general elections combined). This feature made large individual donations more attractive to the candidates. Second, new regulations on the operation of 527 committees led interest groups away from such committees and toward independent expenditures and partisan communications, activities long regulated by campaign finance laws (see chapter 7). The potential impact of this outside money increased the incentives for candidates to fill their own war chests early but also to seek help from interest group allies. The voluntary public financing rules were largely unchanged in 2008. To qualify for public funds during the primaries, a presidential candidate needed to raise $100,000 in amounts of $250 or less, at least $5,000 of which came from each of twenty states. Once the candidate passed that threshold, the first $250 of every individual contribution raised could be matched dollar for dollar with public funds up to one-half of the primary spending limits for that year (PAC and party donations are not matched).

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However, none of these figures had been adjusted for inflation since the inception of the public financing system in 1976. As a consequence, it was rare that a candidate could not qualify for matching funds, but at the same time, the matching funds were much less valuable to qualified candidates. If a candidate voluntarily accepted matching funds, he or she was required to abide by state and overall spending limits, adjusted for inflation. In 2008 the overall limit was $56.7 million, with a maximum of $21 million in matching funds. In addition, the amount of personal funds a participating candidate could give or loan to his or her campaign was limited to $50,000.4 The mismatch between these limits and political reality was particularly acute in the 2008 election, where competitive campaigns were likely to cost a great deal more than the overall spending limit, and some candidates would need to use personal resources to be competitive. In 2008 the decisions by Barack Obama and John McCain regarding public funds led to new interpretations of the rules by the FEC. A good example was the advisory opinion Obama sought and received on raising general election funds during the primary season without jeopardizing his ability to accept public financing in the general election. The combination of these rules and political circumstances defined three financing periods in 2008: the primary season, the bridge period, and the general election campaign. The primary season was defined by the primary calendar and the matching public rules. It started a year before the nomination contests began, a period that has been dubbed the “invisible primary” because of its crucial role in candidate fundraising.5 The invisible primary and the timing of the nomination contests themselves were quite important in 2007–08, but these events occurred largely outside of the public financing system. The bridge period occurred between the end of competitive nomination contests in the spring and the national party conventions in the late summer, where the major-party nominees are formally chosen. As in past elections, the nominations were settled before the conventions in 2008. The Republican bridge period was typical of recent elections (beginning in March, it was about six months long), but the Democratic bridge period was among the shortest ever (beginning in June, it was about three months long). And as in previous elections, the eventual nominees raised and spent funds during the bridge period to sustain their campaigns and prepare for the general election. The general election campaign takes place between the conventions and Election Day. The public financing system provided subsidies for the

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national conventions, and the importance of these funds continued to decline in 2008. The public financing system also provided for a lumpsum general election grant. Under the system’s rules, a candidate who voluntarily accepts the public grant is prohibited from raising or spending private funds. In 2008 John McCain accepted the general election public funds and the associated limitations, but Barack Obama became the first major-party nominee to forgo the general election grant and was thus free to raise and spend private funds (see chapter 4). These decisions were directly tied to the candidates’ nomination finances.

Structure of Competition Candidates’ nomination finances are influenced not only by the law but also by the structure of competition, which has two basic elements. The first is the mechanism by which national convention delegates are chosen in individual states. In 2008 the primary calendar took another step in a long-term trend toward the front-loading of the nomination contests, starting with the Iowa caucuses on January 3—the earliest start ever.6 These dates were largely determined by state governments, but the national parties attempted to reduce front-loading by formally recognizing key early contests and prohibiting other states from scheduling their contests in the same timeframe. Two Democratic and five Republican contests violated these scheduling rules, and the national parties sanctioned the offending states. On the other hand, these efforts created a megaversion of Super Tuesday on February 5, when twenty-three Democratic and twenty-one Republican contests were held—the most ever on a single day. All told, more than one-half of the convention delegates were chosen within the first four weeks of the 2008 primary season. A second element of the competitive structure is the number of candidates in the race. Races with numerous candidates call for different financial strategies than two-candidate races.7 An unusual feature of the 2008 presidential race was the absence of an incumbent president (George W. Bush was term limited) or sitting vice president (Vice President Dick Cheney and former vice president Al Gore chose not to run)—the first such occurrence since 1952. This situation attracted a large number of potential candidates in both parties, eventually eleven Republicans and eight Democrats. Many of these candidates could make a plausible case for winning the nomination, while others, such as Ron Paul and Dennis Kucinich, had a capacity to influence key contests because of their special followings.

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Thus the 2008 primary season combined a very early start with something like a national primary and a large field of candidates. Under these circumstances, the path of the primary season was especially difficult to predict and had a large potential for surprises. One such surprise was the impact of the delegate allocation rules on the conduct of the race. On the Democratic side, rules requiring the allocation of most delegates to candidates in proportion to the number of votes received in the primary or caucus helped prolong a contest with two well-financed candidates, Obama and Clinton. In most states, these competitive campaigns contributed to a fairly even division in the popular vote, which translated into a fairly even division of delegates. When no clear winner emerged, Obama and Clinton had the resources to take their campaigns to all fifty states. But on the Republican side, the prevalence of winner-take-all rules for allocating delegates to candidates helped end the contest quickly. Here McCain was able to convert a plurality of the votes cast in key states into a much larger number of delegates than his opponents received.

Campaign Resources The campaign finance laws and the structure of competition set the basic parameters for candidates’ finances. Each candidate made a calculation of how much money he or she would need as well as the best strategy to acquire and spend it. In 2008 the structure of competition made money especially important. For example, it was widely believed that a minimum of $100 million would be necessary to be competitive, given the front-loaded nomination schedule, and furthermore that early fundraising would be decisive, given the crowded fields.8 As in the past, two general fundraising approaches were available to candidates to secure the needed cash and credibility: an insider strategy and an outsider strategy. An insider strategy concentrates on raising large individual donations through connections with networks of party leaders, interest groups, fundraisers, and consultants. Common tactics include formation of a leadership PAC to finance the development of such connections and the recruitment of a cadre of high-dollar fundraisers (known as bundlers) to exploit them. If successful, such a strategy establishes credibility, drives weaker opponents from the race, secures a resource advantage in the initial contests, and provides a degree of resilience if the candidate falters. A decisive victory then ends the contest, at which point the strategy is applied to raising adequate funds for the bridge period. One sig-

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nificant challenge of this approach is the intense competition for elite connections. Good examples of insider strategies in previous elections are the campaigns of Republican George W. Bush in 2000 and 2004 and his two Democratic rivals, Al Gore in 2000 and John Kerry in 2004. The frontrunning candidates in 2008, Republican John McCain and Democrat Hillary Clinton, initially adopted this approach. Many of their competitors followed a similar strategy, hoping to gain credibility and emerge as the principal rival to the front-runner—if not as front-runner themselves. The past success of insider strategies has produced an expectation that the invisible primary will be long and intense, followed by an effective end of the primary season after the initial contests. An outsider strategy depends on clear issue appeals, novelty, and drama to raise money from beyond the financial elite. Common tactics include tapping new sources of money and raising small donations through direct mail, telephone solicitation, and, recently, the Internet. If successful, such a strategy establishes a candidate’s credibility, undermines betterconnected opponents, and produces sufficient funds to succeed in early contests. Then early victories produce momentum, including additional funds, and eventually victory, at which point the strategy can be applied to financing the bridge period. A major challenge of this strategy is finding and tapping new sources of money. Good examples of the outsider strategy from previous elections include the campaigns of Democrat Howard Dean in 2004 and Republican John McCain in 2000. In 2008 many of the lesser-known candidates initially pursued such a strategy. Perhaps the best examples were Republicans Mike Huckabee and Ron Paul; Democrats Dennis Kucinich and Mike Gravel had less success with a similar approach. One of the goals of an outsider strategy is to prolong the nomination campaign beyond the initial contests, a rare occurrence in past nomination contests (but one often hoped for by advocates of a “brokered” national convention, that is, one decided by party elites rather than by the results of the primaries and caucuses). Interestingly, the Democratic nominee, Barack Obama, used elements of both insider and outsider strategies. He raised significant funds in large amounts, using bundlers to tap networks of high-dollar donors, but he also raised significant sums of new money, especially in small amounts by an innovative use of the Internet.9 One effect of this mixed strategy was an unusually long nomination contest among the Democrats.

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Ironically, John McCain, the eventual Republican nominee, was forced into a mix of strategies as well: after his initial insider campaign faltered, he returned to an outsider strategy resembling his 2000 nomination campaign.10 A number of other candidates had to adjust their financing strategies as the process unfolded, seeking to broaden sources of money and turning to personal funds, loans, and public financing to sustain their campaigns. In fact, all the 2008 candidates engaged in a frenetic quest to raise cash and credibility in one way or another.11 The public financing system figured prominently in such calculations in 2008, although public funds were largely irrelevant to the outcome. Historically, matching funds were a cornerstone of both an insider strategy (because the system reinforced the advantage of a large war chest) and an outsider strategy (because it expanded the value of new money). However, the 2000 and 2004 campaigns showed that either strategy could succeed without matching funds. Moreover, the spending limits associated with public funds were problematic, accounting for only about one-half the $100 million believed necessary in 2008 to be competitive. Although many candidates wanted to keep the matching funds option open for as long as possible, most of the competitive candidates opted not to take public funds in 2008.

Campaign Receipts and Disbursements in 2008 Table 3-1 lists adjusted receipts and disbursements for all presidential candidates for the primary season and bridge periods combined (January 1, 2007, to August 31, 2008).12 A combined total of $1.2 billion was raised by all candidates in 2007–08 (see chapter 1), 185 percent more than the $675 million collected during the same period in the 2004 cycle. A total of $1.1 billion was spent by the candidates, an increase of 190 percent over the 2004 figure of $587 million. These increases were of comparable size to the increase between 2004 and 2000, revealing an accelerating expansion of nomination finance over the past decade.13

The Major-Party Nominees The bulk of this increase in nomination finances came from Barack Obama, who raised $453.9 million, a figure that was nearly double the amount raised by John Kerry ($241.0 million) and George W. Bush ($258.9 million) in 2004. John McCain’s 2008 fundraising effort was

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Table 3-1. Adjusted Receipts and Disbursements, 2008 Presidential Nomination Campaigns a Millions of dollars Candidate

Receipts

Disbursements

Democrats Obama Primary season Bridge periodb General electionc Clinton Edwards Richardson Dodd Biden Kucinich Gravel

453.9 287.5 125.4 41.0 220.1 49.6 22.2 15.1 11.9 5.5 0.5

376.5 251.3 125.2 0.0 211.6 43.5 22.1 15.1 11.1 5.3 0.6

Republicans McCain Primary season Bridge periodd Romney Giuliani Paul Thompson, F. Huckabee Tancredo Brownback Hunter Thompson, T. Gilmore

210.6 61.2 149.4 105.2 58.7 34.5 23.5 16.1 8.2 4.2 2.8 1.2 0.3

177.8 55.7 122.1 105.1 58.6 30.4 23.2 16.1 8.2 4.2 2.8 1.2 0.4

Independent Nader

1.9

2.1

Libertarian Barr

0.9

0.8

Constitution Baldwin

0.1

0.1

Green McKinney

0.1

0.1

Source: Compiled from Federal Election Commission records. a. Through the nomination period ending August 31, 2008. b. Bridge period for Obama: June–August 2008. c. Funds raised by Obama during nomination period to be used during general election period; see text for details. d. Bridge period for McCain: March–August 2008.

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substantial, but at $210.6 million it was less than either Bush or Kerry raised in the previous election. In the primary season, Obama raised $287.5, almost five times the $61.2 million raised by McCain. Although the Democratic contest was three months longer and reached every state and territory in the union, Obama’s advantage during the active campaign was still quite impressive: Obama’s average monthly fundraising for the seventeen months of the active Democratic primary campaign was $16.9 million compared with McCain’s average of $4.4 million for the fourteen months of the active Republican campaign—almost a four-to-one ratio in Obama’s favor. This ratio was similar to 2004, when President Bush raised $158.3 million during the primary season and John Kerry raised $40.6 million— nearly a four-to-one advantage for Bush. The major difference, of course, is that Bush was an incumbent president facing no primary opponents in 2004, while Obama was a nonincumbent facing an experienced and wellfunded field of opponents in 2008. Obama’s principal opponent, Hillary Clinton, raised $220 million during the primary season, nearly four times McCain’s 2008 total of $61 million—and five times Kerry’s 2004 total of almost $41 million. In the bridge period, Obama raised an additional $125.4 million and McCain $149.4 million. But because the Democratic bridge period was only half as long (three months) as the Republican (six months), the monthly bridge period average was $41.8 million for Obama compared with $24.9 million for McCain. As table 3-1 reveals, Obama also raised an additional $41 million in general election funds during the primary season (based on an advisory opinion he sought and obtained from the FEC). While these funds would not be available until Obama was formally nominated in late August, they represented almost one-half of the $84 million in public funds that McCain accepted when he became the Republican presidential nominee.14 Looked at another way, Obama raised 36.6 percent of his total funds during the bridge period or for the general election, a figure similar to the 31.7 percent for Bush’s 2004 funds. McCain raised 70.9 percent of his funds in the 2008 bridge period, and in 2004 Kerry raised 71.9 percent. The key factor behind these patterns is the relative success of candidates in raising funds during the primary season and bridge periods.

Other Candidates Obama’s chief rival for the Democratic nomination, Hillary Clinton, was a notably successful fundraiser as well, accumulating $220.1 million

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and spending $211.6 million during the nomination period. This figure was greater than the total funds John McCain raised in 2008 and about five times greater than John Kerry’s 2004 fundraising during the active nomination contests. She surpassed George W. Bush’s $158.3 million in 2004 by more than $60 million. However, Clinton lagged $43 million behind Obama in funds raised and spent during the primary season. The other Democratic candidates fared less well. John Edwards, the 2004 vice-presidential nominee, raised substantially more in the 2008 than in the 2004 primaries ($49.6 million compared with $29.2 million). Bill Richardson raised $22.2 million, an amount roughly comparable to Wesley Clark’s or Richard Gephardt’s in 2004, and Mike Gravel did about as well as Al Sharpton in 2004. Interestingly, Dennis Kucinich did worse in 2008 ($5.5 million) than in 2004 ($10.9 million). Nevertheless, all told, it was a banner year for Democrats, with a total of $779 million raised during the primary election phase compared with $412 million in 2004. Some of McCain’s Republican rivals were also well financed. Mitt Romney raised $105.2 million, exceeding McCain’s total during the primary season, while Rudy Giuliani raised $58.7 million, nearly matching McCain’s $61.2 million. Mike Huckabee was much less well financed, with just $16.1 million, trailing two other candidates with less success at the polls, Ron Paul ($34.5 million) and Fred Thompson ($23.5 million). All together, the Republican candidates raised $465 million in the 2008 nomination phase, substantially more than Bush raised during the same period in 2004. (For the sake of completeness, it is worth noting that minor-party fundraising during the primary season was $3 million in 2008, about the same as the $3.3 million in 2004.)

Sources of Candidate Funds in 2008 The candidates for the presidential nomination in the two major parties collectively raised $1.2 billion in 2007–08. Where did this money come from? Table 3-2 looks at the sources of campaign funds for presidential candidates in 2007–08 (for Obama and McCain, the figures are broken out by the primary season and the bridge period).15 As in the past, individual donations accounted for most of the funds, but there has been a dramatic surge in the number of individual donors in recent times.16 The pattern of donations reflects the strategies employed by the candidates. Part of this surge reflects the larger individual contribution limit in 2008, but an expansion in the number of individual donors appears to have had

Democrats Obama Primary season Bridge periodc Clinton Edwards Richardson Dodd Biden Kucinich Gravel 222.2 134.2 88.0 52.1 10.2 5.0 0.6 1.3 3.3 0.3

Less than $200

82.9 50.8 32.1 29.5 5.3 3.3 0.8 1.0 0.5 0.1

$200– 999

68.1 42.5 25.6 34.2 8.6 4.8 2.5 2.2 0.3 0.0

$1,000– 2,299

Individual contributions

79.6 48.9 30.7 53.9 7.4 8.5 4.3 2.5 0.3 0.0

$2,300 or more b

0.0 0.0 0.0 0.0 12.9 0.0 0.9 2.0 1.1 0.0

Federal matching funds

0.0 0.0 0.0 24.5 0.0 0.0 0.0 0.0 0.0 0.0

25.9 0.0 25.9 1.3 0.0 0.3 4.7 2.1 0.0 0.0

Candidate or PACs and authorized party committees committees

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Candidate

Millions of dollars

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Table 3-2. Source of Funds of Major Parties, 2008 Presidential Nomination Campaigns a

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62.2 13.7 48.5 8.5 4.3 21.6 10.4 6.9 3.2 1.9 1.3 0.1 0.0

31.4 8.0 23.8 7.0 5.7 6.5 3.0 2.8 0.4 0.4 0.3 0.2 0.0

42.3 13.9 28.4 19.0 16.0 4.0 3.6 2.8 0.3 0.7 0.4 0.3 0.1

67.4 20.2 47.2 25.1 28.8 2.3 6.1 3.5 0.1 0.5 0.3 0.5 0.2

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.1 0.0 0.5 0.0 0.0

1.0 1.0 0.0 42.4 0.8 0.0 0.0 0.0 0.0 0.0 0.0 0.2 0.0

21.5 0.7 20.8 0.4 2.5 0.0 0.2 0.0 0.1 0.6 0.0 0.0 0.0

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Sources: Data from the Campaign Finance Institute and Federal Election Commission. a. Through the nomination period ending August 31, 2008. b. Although individual contribution cannot exceed $2,300 for the nomination phase, individuals may also contribute an additional $2,300 to a candidate for use during the general election campaign, up to $4,600 overall. c. Bridge period for Obama: June–August 2008. d. Bridge period for McCain: March–August 2008.

Republicans McCain Primary season Bridge periodd Romney Giuliani Paul Thompson, F. Huckabee Tancredo Brownback Hunter Thompson, T. Gilmore

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a much larger impact. Appeals by new candidates account for some of this growth—since every candidate brings some special supporters to the donor pool—but new solicitation methods appear to have been especially important in 2008.17 The Obama campaign benefited from both of these elements. Table 3-2 reveals the vast size and scope of Obama’s primary-phase contributions from individuals. For example, Obama raised $79.6 million from individuals making the largest contributions. This figure was higher than max-out contributions to any other Democrat, with the exception of Clinton, whom Obama trailed by about $5 million in this category. Obama also raised more than his Democratic rivals in every other category of individual contributions; as can be seen in the table, the size of the fundraising difference between Obama and other Democrats increases as the size of the maximum contribution decreases. Obama also raised $30.7 million for his general election campaign from donors contributing during the primaries. A comparison between Obama and McCain shows a similar pattern, Obama trailing McCain among contributions of $1,000 or more during the bridge period (by about $19 million) but leading him among contributions of less than $200 (by about $40 million). Thus Obama was successful in obtaining individual donations of all sizes and across all stages of the election cycle, but he outpaced the other candidates by the largest margin among small donors. Obama’s fundraising breadth can be seen in the relative distribution of donations by individuals as a percentage of his total funds: donations of $1,000 or more made up 30 percent, while donations of less than $200 made up 46 percent. These patterns were essentially the reverse of Clinton’s (45 percent from donations of $1,000 or more; 27 percent from donations of less than $200) and McCain’s (48 and 28 percent, respectively). They differed similarly from those of Bush (56 and 30 percent, respectively) and Kerry (40 and 34 percent, respectively) in 2004. The magnitude and scope of the individual donations to Obama reflect the campaign’s successful use of a wide array of fundraising techniques, including both insider and outsider strategies. For example, Obama prepared for his presidential bid by establishing a leadership PAC, Hopefund, which raised $4.4 million in the 2006 election cycle. This timehonored technique allowed him to finance travel, develop campaign resources, and make connections with Democratic elites across the country. He also established a cadre of 605 bundlers, following the approach Bush pioneered in 2000.18 This technique allowed the campaign to tap

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into existing networks of finance operatives often willing to make larger contributions, but it also stimulated new networks as well, such as within Silicon Valley.19 The Obama campaign also continued the tradition of fundraising events, ranging from large-scale dinners to small, intimate meetings: Obama held 104 such events during the active primary season and 19 during the bridge period.20 He did not neglect staples of small-donor fundraising, such as direct mail and telephone soliciting.21 However, his major innovation was the expanded use of Internet fundraising, building on campaigns of Howard Dean and Wesley Clark in 2004 and John McCain in 2000.22 Online fundraising allowed the campaign to reach individuals outside of the existing pool of donors and obtain small—and often repeated—donations from them. A significant feature of Obama’s online operation was the adaptation of social networking tools to recruit supporters. This approach borrowed heavily from Facebook and MySpace as well as other Web innovations such as YouTube, Flickr, Twitter, BlackPlanet, and Digg. In turn, these features were part of the broader interactive Web culture exemplified by bloggers and online commerce. They also paralleled other developments in communication, such as the expanded use of cell phones, BlackBerry devices, and text messaging. Joe Rospars of the Obama campaign described the strategy this way: “We’ve tried to orient the tools less as a social network and more as a mobilization network . . . creating opportunities for people to get out there and do things—the campaign is electionoutcome oriented.”23 Central to this adaptation was My.BarackObama.com, also known as MyBO, the social networking hub of the Obama campaign website. This tool allowed participants to create their own place in the ongoing Obama campaign. Among other things, MyBO featured a variety of ways to contribute (such as making a donation by credit card and signing up to make a recurring gift throughout the campaign) as well as incentivized appeals to contribute (such as time-specific fundraising goals and contribution matching) and opportunities to purchase campaign merchandise (such as bumper stickers, lawn signs, T-shirts, and other memorabilia). The campaign spared no effort in directing people to the website, including extensive advertising on the Internet and the integration of Web appeals into all campaign communication. MyBO also deployed extensive and highly targeted e-mail solicitations, especially to its participants. The campaign sent some 7,000 different messages to 13 million e-mail addresses.24

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MyBO.com also facilitated the involvement of supporters in campaign activities under their own direction, a phenomenon aptly described by the innovative marketer Tim Leberecht as “disciplined decentralization.”25 These activities ranged from attending rallies to involvement in get-out-the-vote projects as well as fundraising on behalf of the campaign, online (with their own page and blog on MyBO) or otherwise (in person, by telephone, or by mail). This fundraising activity was so successful that the Obama campaign set up a grassroots finance committee to train supporters to effectively solicit family, friends, and co-workers. These volunteers were often integrated into more formal campaign activities, such as operating telephone banks to solicit donations. In a fashion reminiscent of other kinds of fundraising, MyBO turned “funders into fundraisers,” creating “microbundlers” who reached into social networks otherwise invisible to a national campaign.26 Fundraising aside, the Obama campaign mobilized a large cadre of enthusiastic volunteers through the Internet.27 In this last regard, the Obama campaign was more successful than previous campaigns that stressed online fundraising. Like all fundraising techniques, online fundraising has benefits and costs. One of the chief benefits is low cost per dollar raised, a fact that is particularly important for raising money in small amounts. But there are large costs associated with setting up successful online fundraising. The Obama campaign paid these costs by investing heavily in personnel with cutting-edge skills and then providing them with extensive resources with which to work.28 In this regard, Obama differed from other candidates in 2008, some of whom also invested funds in online fundraising but at a much lower level. Another of the benefits of online fundraising is immediacy, in two senses of the term. First, online fundraising gives candidates the ability to reach specific supporters quickly and with great precision, using multiple, highly targeted appeals. Second, because online fundraising operates substantially by credit or debit card, the funds are immediately available in the campaign’s accounts and can be expended with little delay. However, there are also large costs associated with taking advantage of both kinds of immediacy. For one thing, they require extensive and up-to-date data about past and potential contributors as well as the creative use of those data to advance the campaign. Here the Obama campaign made an unprecedented effort to obtain, process, and deploy such data, which it then fully integrated into the campaign’s strategy and tactics. None of Obama’s rivals were as data conscious or data based in their operations.29

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Yet another benefit of online fundraising is engagement with donors through two-way communication. This presumes that the campaign has something with which to engage supporters. Obama himself and his theme of change were an inspiration to a large number of people in 2008. The campaign took pains to effectively deploy the messenger and the message in the Web environment. The campaign also sought to empower campaign activists as fundraisers, which required giving up a great measure of control over fundraising, permitting activists to enlarge the reach of the solicitation. As Joe Rospars of the Obama campaign recalls, We tried to enable folks to take control of the processes as much as they were willing at every stage. . . . [We used the] notion of people with their personal fundraising pages on My Vote where they have their own thermometer and they set their own goals. There is an address book and follow-up prompt [to tell them that] . . . this person gave, and it prompts you to send them a thank you note; or this person has not responded, so maybe you should send them a reminder. Things like that.30 Certainly, other candidates also inspired a following among activists: Clinton and women, Huckabee and evangelicals, Paul’s appeal to young libertarians. However, no candidate rivaled the depth and breadth of Obama’s appeal in 2008, not to mention the innovative way that he used such appeal to raise funds. The other competitive candidates relied more heavily on the insider strategy of leadership PACs, fundraising events, and bundlers. For example, Clinton’s leadership PAC, Hill PAC ($2.9 million in 2005–06 election cycle), held 76 fundraising events during the primary season and reported 323 bundlers, the Hillraisers. John McCain’s leadership PAC, Straight Talk America ($7.9 million in 2005–06 election cycle), held 84 fundraising events during the primary season and 60 in the bridge period and reported more than 851 bundlers. Mitt Romney also followed this model, with a leadership PAC, The Commonwealth PAC ($2.9 million in 2005–06 election cycle), 137 fundraising events, and 345 bundlers, as did Rudy Giuliani, with his Solutions America PAC ($2.4 million 2005–06 election cycle), 41 fundraising events, and 226 bundlers.31 One competitive candidate fit the traditional model of the public financing system. John Edwards accepted matching funds in 2008 ($12.9 million), a source that complemented the one-third of his privately raised funds that

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came from donations of less than $200 ($10.2 million). However, Edwards also had a leadership PAC, One America Committee ($2.8 million in 2005–06 election cycle), held 28 fundraising events, and had 665 bundlers. Several candidates supplemented their campaigns with other sources of money. Clinton transferred $10 million from her U.S. Senate campaign and lent her presidential campaign $13.2 million of her own funds. Mitt Romney loaned his campaign $42.3 million of his own funds. Romney’s loans exceed the previous record for a nomination candidate, Steve Forbes’s $39 million in 2000, but fell short of independent Ross Perot’s $63.5 million in 1992. Two Republican candidates employed outsider fundraising strategies with some success. Ron Paul raised nearly two-thirds of his funds in donations of less than $200 ($21.6 million), mostly online, and Mike Huckabee obtained two-fifths of his funds from small donations ($6.9 million), mostly raised in tandem with his success in the primaries.

Outside Money in 2008 The 2008 nomination campaign also involved considerable outside money, funds spent by interest group organizations and individuals for or against particular candidates. Table 3-3 reports three measures of such expenditures: independent spending and partisan communication costs for candidates (both operating within the campaign finance regulations) and electioneering communications costs reported by 527 committees (operating on the margins of the campaign finance regulations). As in the previous tables, these funds are separated into the primary season and the bridge period. Given the reporting requirement, these figures surely understate the level of outside money, but they are nonetheless instructive. Table 3-3 suggests that outside spending by interest groups and individuals in the presidential nomination race amounted to at least $79.1 million in 2008. The largest portion of the 2008 spending was independent expenditures, totaling $49.1 million ($31.7 million reported by the organizations themselves to be “for” candidates and $17.4 million “against”). Communication costs made up the next largest amount at $17.8 million ($16 million for candidates and $1.8 million against). Spending reported as electioneering communications accounted for the smallest portion of these funds, with a total of $12.2 million ($8.3 million for candidates and $3.9 million against). To put these funds in perspective, all outside money was the equivalent of about one-fifth of Obama’s total spending in the pri-

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mary season and bridge period and more than two-fifths of McCain’s total spending. These are hardly trivial sums, even in the context of the expanded candidate fundraising. Outside spending appears to have been greater in the 2008 primaries than in 2004, when such funds amounted to at least $60.8 million.32 Independent expenditures more than doubled in 2008 (up from $23.7 million in 2004), and communication costs nearly tripled (up from $6.7 million). However, specifically designated electioneering communications expenditures declined by three-fifths in 2008 (down from $30.4 million in 2004). The bulk of outside money was spent during the primary season in 2008 ($50.6 compared with $13.9 million in 2004) rather than during the bridge period ($28.7 compared with $46.9 million in 2004). Indeed, the Swift Boat Veterans and POWs for Truth campaign against John Kerry in 2004 is a good example of a bridge-period expenditure of outside money. In 2008 the outside money was concentrated in the Democratic primary. Obama was the subject of $18.8 million in spending (with $15.8 million spent for and $2.9 million spent against his candidacy). Clinton was the subject of more outside spending, totaling $23.4 million (with $21.6 million spent for and $1.8 million against her candidacy). To put these figures into perspective, the outside spending for Obama’s and Clinton’s campaigns was equal to less than one-tenth of each candidate’s primary-season spending. Other Democratic candidates were the subject of $5.8 million in outside spending, the bulk of which was directed toward John Edwards ($3.9 million). In addition, Mike Gravel was the beneficiary of $1.2 million in independent expenditures by hedge fund manager and supporter Gregory Chase. Obama received the strongest outside support from the Service Employees International Union and Change to Win, among labor unions, and from the progressive groups PowerPAC and MoveOn.org. Clinton received the backing of the American Federation of State, County, and Municipal Employees, the American Federation of Teachers, and the American Nurses Association among labor unions and of feminist groups such as EMILY’s List, NARAL, and the National Organization for Women (NOW). Edwards also received support from labor unions, especially the Alliance for a New America and Working 4 Working Americans. Much less outside money was involved in the Republican primaries, total spending amounting to $2.4 million. Huckabee was the subject of the largest portion of these expenditures, $1.1 million, including some $750,000 in electioneering communications expenditures against him by

Democrats Obama Primary season Bridge periodb Clinton Edwards Richardson Dodd Biden Kucinich Gravel

Candidate

21,829,389 11,734,834 10,094,555 6,058,564 121,893 19134 263,123 6,759 16,016 1,272,994

For

10,986,943 855,114 10,131,829 1,560,773 0 0 0 0 0 0

Against

2,749,241 2,657,469 91,772 12,033,537 876,266 29,289 219,063 26,424 26,424 26,424

For

374,079 144,271 229,808 99,025 0 0 0 0 0 0

Against

Partisan communication costs

1,902,152 1,498,152 404,000 3,479,980 2,911,466 0 0 0 0 0

For

1,937,454 1,937,454 0 167,625 0 0 0 0 0 0

Against

Electioneering communication costs

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Independent expenditures

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Table 3-3. Outside Money, 2008 Presidential Nomination Campaignsa

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401,489 168,684 346,299 0 0 0 0 2,300

1,144,311 0 1,144,311 50,000

4,644,943 176,814 4,468,129 24,715 126,387 0 0 15,673 0 0 0 0 0

0 0 0 0 0 0 0 26,337 0 0 0 0 0

1,365,261 0 1,365,261 27 0 0 0 103 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0 0 0

1,013,472 243,501 769,971 46,934 0 0 0 751,362 0 0 0 0 0

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Source: Compiled from Federal Election Commission records. a. Through the period ending August 31, 2008. Expenditures reported as for or against a candidate are self-reported by the groups making the expenditure. b. Bridge period for Obama: June–August 2008. c. Bridge period for McCain: March–August 2008.

Republicans McCain Primary season Bridge periodc Romney Giuliani Paul Thompson, F. Huckabee Tancredo Brownback Hunter Thompson, T. Gilmore

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the Club for Growth and some $340,000 in independent expenditures for him by Common Sense Issues, a PAC organized by conservative Christians. Ron Paul benefited from some $400,000 in independent expenditures by individual supporters. These efforts resembled independent spending by groups such as Republicans for Clean Air in the 2000 GOP primary season.33 During the bridge period, Obama was the subject of $10.6 million in outside spending in favor of his candidacy and $10.4 million against him. Meanwhile, McCain was the subject of $1.1 million for his candidacy and $6.6 million against. These expenditures were undertaken by a wide variety of groups allied with the Democratic and Republican parties and were largely directed at influencing the general election. Indeed, many of these groups continued to spend in this fashion during the fall (most of the $400,000 spent against McCain during the primary season appears to have been initial stages of such efforts). In this regard, outside spending during the bridge period in 2008 differed from 2004. In 2008 such spending was dominated by independent expenditures, but in 2004 it was dominated by 527 committees.34

The Dynamics of the Campaign: Democrats Figures 3-1 and 3-2 provide an overview of the dynamics of fundraising for the three most competitive candidates among the Democrats: Barack Obama, Hillary Clinton, and John Edwards. Figure 3-1 plots total funds raised, and figure 3-2 plots cash on hand for the primary season and the bridge period. Political observers commonly use these patterns to interpret and handicap the nomination horse race.35 As noted above, the Democratic presidential nomination attracted a large field of candidates in 2008. Conventional wisdom regarded New York senator Hillary Clinton as the front-runner for the nomination, on the strength of her prominence and her past association with the White House. Many analysts believed that former North Carolina senator John Edwards, the 2004 Democratic vice-presidential nominee, was likely to be her strongest rival. But other potentially strong candidates entered the race as well: New Mexico governor Bill Richardson, a Hispanic with an extensive resume; Delaware senator Joe Biden (who had run for president in 1988) and Connecticut senator Christopher Dodd, both well-connected and long-serving party insiders; and Illinois senator Barack Obama, a rising star in the party. In addition, Representative Dennis Kucinich of Ohio

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Figure 3-1. Cumulative Receipts, Democrats, by Month, January 2007–July 2008 Millions of dollars

400

Obama

300 Clinton 200

100

20 Fe b0 20 7 M ar 07 20 Ap r0 20 7 M ay 07 20 Jun 0 7 20 Jul 0 20 7 Au g0 7 20 Sep 07 20 Oc t0 20 7 No v0 20 7 De c0 7 20 Jan 0 8 20 Fe b0 20 8 M ar 0 20 8 Ap r0 20 8 M ay 08 20 Jun 08 20 Jul 08

Edwards

Source: Data from candidates’ monthly and quarterly filings with the FEC, analyzed by the authors (ftp://ftp. fec.gov/FEC/).

and former Alaska senator Mike Gravel also threw their hats into the ring. Given the preponderance of well-connected candidates, most observers believed that a long and intense invisible primary would be followed by a short and decisive primary season.36 Clinton set out to capitalize on her status as front-runner with an insider strategy, central to which were the Hillraisers, bundlers committed to raising $100,000 each for the campaign by drawing on their connections with the Democratic establishment of party leaders, interest group officials, and lobbyists. Expecting to raise an ample war chest, the campaign recruited a large number of well-known consultants and built a sophisticated campaign organization. The basic plan was to help narrow the field of candidates during the invisible primary and then dispatch surviving rivals in Iowa and New Hampshire—and, failing that, to wrap up the nomination on Super Tuesday. As part of this plan, Clinton announced that she would forgo matching funds for the primaries and also refuse public funds for the general

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Figure 3-2. Cash on Hand, Democrats, by Month, January 2007–July 2008 Millions of dollars

Obama 60 Clinton 40

20

20

20

Fe b0 7 M ar 0 20 7 Ap r0 20 7 M ay 0 7 20 Jun 0 7 20 Jul 07 20 Au g0 7 20 Sep 07 20 Oc t 07 20 No v0 20 7 De c0 7 20 Jan 0 8 20 Fe b0 20 8 M ar 08 20 Ap r 08 20 M ay 08 20 Jun 08 20 Jul 08

Edwards

Source: Data from candidates’ monthly and quarterly filings with the FEC, analyzed by the authors (ftp://ftp. fec.gov/FEC/).

election. She then began raising funds for both elections, a practice common in congressional campaigns. Thus unlike Obama and McCain, Clinton did not have to worry about the impact of her primary fundraising on her eligibility for public funds in the general election. Most of the other candidates followed a fundraising strategy similar to Clinton’s but with the hope of becoming her chief rival and winning early contests. Many of these candidates chose to keep open the option of accepting public funds in one form or another. Here Obama had the most sophisticated approach. Although he expected he would forgo matching funds to compete with Clinton in the primary season, this decision would not have to be made until late 2007. Obama wanted to keep open the option of accepting public funds in the general election, largely for practical reasons. In addition, this position created a contrast with Clinton on the issue, a difference reinforced by Obama’s pointed refusal to take contributions from lobbyists or PACs.37

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The first step in Obama’s approach came in February 2007, when he sought an advisory opinion from the Federal Election Commission on whether his campaign could accept contributions for the general election without waiving his eligibility for general election public funds. This concern separated Obama from Clinton because she had already chosen to forgo public funds in the general election. The commission issued an advisory opinion saying that Obama could raise general election funds and still be eligible for general election public funds provided that such general election contributions were used for no other purpose and were refunded if Obama chose to accept general election public funds. Soon after receiving the advisory opinion Obama announced that he would accept public funds for the general election on two conditions: if the Republican nominee took the public funding and if the Republican nominee also agreed to a limit on outside money. This caveat reflected a concern that 527 committees would play a major role in supporting the Republican nominee in the general election and may also have reflected the activities of 527 committees in the Democratic primaries. Clinton’s insider strategy was largely successful: she raised substantial sums in large contributions and diminished the credibility of many rivals. Indeed, the eagerly awaited first quarter of 2007 finance reports showed that Clinton had raised $36 million, Edwards $14 million, and Dodd, Biden, and Richardson less than $10 million each. But the big surprise was that Obama had raised $25 million. If one took into account the fact that Clinton had initially transferred $10 million from her Senate campaign committee, then Obama fundraising was just $1 million behind the front-runner—and was almost even in terms of donations from individuals. The contest was suddenly perceived as a three-candidate race, with Obama and Edwards the principal challengers to the front-runner Clinton. The key to Obama’s initial success was the balance in his fundraising, which employed bundlers as well as online fundraising—in fact, a full range of fundraising techniques. In the first quarter, for example, Clinton outraised Obama among donations of $1,000 or more by $5 million (Clinton’s $22 million to Obama’s $17 million), but Obama outraised Clinton among donations of $200 or less by $3.3 million ($5.6 million and $2.3 million, respectively). These patterns worked to Obama’s net advantage during the invisible primary, as his bundlers did well and his online fundraising accelerated. By the end of 2007, Clinton had outraised Obama by $11 million ($63 million and $52 million, respectively) among donations of $1,000 or more, but Obama had outraised Clinton by

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$20 million ($31 million to Clinton’s $11 million) among donations of $200 or less.38 As figure 3-1 reveals, total funds raised by Clinton and Obama tracked very closely throughout the invisible primary, with Obama only slightly behind. Note that Edwards’s total funds—and those of most other Democratic candidates—were essentially flat over the period. As figure 3-2 shows, Clinton held a large advantage in cash on hand throughout 2007, mostly because of her large-dollar fundraising. However, Obama still had ample funds with which to compete, owing to his success in small-dollar fundraising. These vast resources financed an intense campaign in the early nomination contests, especially the Iowa caucuses, with a slight advantage for Obama over Clinton. For example, Obama spent $9.6 million on television advertising compared with Clinton’s $8.1 million.39 Obama spent thirtyseven days campaigning in the Hawkeye State and opened thirty-seven field offices, while Clinton spent thirty-four days campaigning and opened thirty-four field offices there.40 Obama most likely held an edge in the number of enthusiastic volunteers as well. Edwards stayed competitive in Iowa partly because of outside group spending by the Alliance for a New America ($394,000) and Working 4 Working Americans ($393,000). At the same time, Clinton and Obama received support from various unions in the form of partisan communications.41 Obama finished first in the Iowa caucuses, followed by Edwards, with Clinton third. As in past elections, these results changed the shape of the race. Biden, Dodd, and Richardson soon quit the campaign, and Edwards’s days were numbered—if only because he was fast approaching the spending limits associated with the public matching funds he had accepted. The Iowa victory brought Obama immediate fundraising gains, besting Clinton $37 million to $20 million in January, including a significant advantage ($16 million to $4 million) among donations of less than $200. As a consequence, Obama caught up with Clinton in total funds raised (figure 3-1) and in cash on hand in January 2008 (figure 3-2). The Iowa caucuses set off a protracted, seesaw battle between Obama and Clinton that lasted until early June. This struggle surprised most observers, who had expected a short primary season; a key factor was the ability of both campaigns to raise enough money to remain competitive. Initially, Clinton managed to stay in the race by winning the New Hampshire primary and the Nevada caucuses, but then Obama countered by winning the South Carolina primary. During this period, each candidate

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spent another $8.5 million on television advertising. The two candidates essentially broke even on Super Tuesday: Obama won thirteen contests and 848 delegates (spending $14.1 million on television advertising), and Clinton won nine contests and 830 delegates (spending $11.2 million on television ads).42 After Super Tuesday, the Clinton campaign found itself in disarray: its insider strategy had failed to quickly end the contest as planned—and as many observers had expected. In addition, the campaign faced financial difficulties. For one thing, most of its campaign funds had been spent, and many of its high-dollar donors had given the maximum contribution. Both the limited number of high-dollar donors and the high cost of such solicitation posed a major challenge to refilling Clinton’s war chest. In response, Clinton loaned her campaign $5 million of her own funds (she would eventually loan a total of $13.2 million) and expanded the range of fundraising efforts, including new attention to online fundraising. These moves met with some success, especially the online activities. But as figures 3-1 and 3-2 show, after Super Tuesday Obama began to pull ahead of Clinton both in total funds raised and in cash on hand, raising in February $55 million (including $30 million in donations under $200) to Clinton’s $35 million (including $17 million in donations under $200). As these differences show, Obama’s online fundraising was central to these gains, reflecting the low cost of raising such funds and the high speed with which new donors—and old donors—could respond to his electoral success. Indeed, repeated small donations appear to have accounted for a large portion of Obama’s financial gains. During the post–Super Tuesday period of disarray in the Clinton camp, Obama won nine straight contests, mostly in caucus states, outspending Clinton on television advertising $4.8 million to $1.1 million. Beginning in March, Clinton rallied once again, winning the Ohio, Texas, and Pennsylvania primaries. Outside money was prominent in these contests; the American Leadership Project ran television ads in support of Clinton ($779,000) and opposed to Obama ($473,000), and the Service Employees International Union ran ads on behalf of Obama ($2.3 million) in these key states. But the Clinton rally was too little and too late: Obama maintained his slim lead in the delegate count as well as an advantage in total funds raised and cash on hand (see figures 3-1 and 3-2). During this period, Obama was able to outspend Clinton $41.0 million to $19.6 million on television spots. The race continued through the very last contest, and Clinton ended her campaign in early June.

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Figure 3-3. Cumulative Receipts, Republicans, by Month, January 2007–July 2008 Millions of dollars 250

McCain

200

150 Romney

100

Guiliani 50

ar

M

20

20

Fe

b0

7

07

0

20 Ap r0 20 7 M ay 07 20 Jun 07 20 Jul 07 20 Au g0 7 20 Sep 0 7 20 Oc t0 20 7 No v0 20 7 De c0 7 20 Jan 08 20 Fe b0 20 8 M ar 0 20 8 Ap r0 20 8 M ay 0 8 20 Jun 0 8 20 Jul 08

Huckabee

Source: Data from candidates’ monthly and quarterly filings with the FEC, analyzed by the authors (ftp://ftp. fec.gov/FEC/).

The Dynamics of the Campaign: Republicans Figures 3-3 and 3-4 provide an overview of the dynamics of fundraising for the four most competitive candidates among the Republicans: John McCain, Mitt Romney, Rudy Giuliani, and Mike Huckabee. Figure 3-3 plots total funds raised, and figure 3-4 cash on hand, for the primary season and the bridge period, in a fashion analogous to the figures for the Democratic candidates.43 Despite President Bush’s low popularity and an unfavorable issue environment, there was no shortage of candidates seeking the GOP presidential nomination in 2008. Conventional wisdom had John McCain as the clear front-runner because of his national prominence and experience he had gained through his 2000 nomination bid. There was no clear consensus on the identity of McCain’s chief rival, but plausible names included former Massachusetts governor Mitt Romney and former New York City mayor Rudolph Giuliani. Second-tier candidates included former

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Figure 3-4. Cash on Hand, Republicans, by Month, January 2007–July 2008 Millions of dollars

30

McCain

25 20 Guiliani

15 Romney 10 Huckabee

20

20

Fe b0 7 M ar 0 20 7 Ap r0 20 7 M ay 0 7 20 Jun 0 7 20 Jul 07 20 Au g0 7 20 Sep 07 20 Oc t 07 20 No v0 20 7 De c0 7 20 Jan 0 8 20 Fe b0 20 8 M ar 08 20 Ap r 08 20 M ay 08 20 Jun 08 20 Jul 08

5

Source: Data from candidates’ monthly and quarterly filings with the FEC, analyzed by the authors (ftp://ftp. fec.gov/FEC/).

Arkansas governor Mike Huckabee, former Tennessee senator (and actor) Fred Thompson, Kansas senator Sam Brownback, former Wisconsin governor and U.S. cabinet secretary Tommy Thompson, and former Virginia governor Jim Gilmore. In addition, three members of Congress threw their hats in the ring: Ron Paul of Texas (who had run for president as the Libertarian nominee in 1988), Tom Tancredo of Colorado, and Duncan Hunter of California. As with the Democratic contest, most observers believed that a long invisible primary would be followed by a short primary season. Like Clinton, McCain set out to secure his front-runner status by building a sophisticated campaign organization that could help narrow the field of rivals and defeat the survivors in the early contests. McCain secured the services of many of the best Republican consultants and campaign operatives, setting up a 120-person staff, a well-equipped Washington headquarters, and field staff in key primary states. These plans assumed that McCain could raise $100 million or more during the invisible primary,

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and he chose an insider strategy of bundlers and large donations as central to this goal. But given that McCain had been a champion of campaign finance reform, he did not formally rule out accepting public funds, especially for the general election. Most of the other candidates opted for a similar strategy: an emphasis on large donations early in the process to establish credibility in order to become the chief alternative to the front-runner and win early contests. Not all the candidates were able to employ an insider strategy, and those who could not had to follow an outsider strategy, including online fundraising. But unlike McCain, most were opposed to public financing on philosophical grounds and thus had no qualms about forgoing matching funds. (A few of the GOP candidates did ultimately accept matching funds for practical reasons.) The initial amount of money raised by the Republican candidates fell short of the fundraising of Democratic candidates, a pattern that would hold throughout the primary season. But the big surprise was McCain’s poor fundraising performance: in the first quarter of 2007 he raised just $14.8 million, substantially behind Romney at $23.3 million and Giuliani at $18.0 million (none of the remaining candidates broke the $2 million mark). One key factor was that McCain’s chief rivals did markedly better with donations of more than $1,000, owing in part to their bundlers. As a consequence, McCain quickly revamped his fundraising operation. There were many reasons for these financial troubles, but one may have been strategic: McCain, the “maverick,” may not have been especially well connected with the Republican establishment and thus may have been less able to use such connections to raise large donations. McCain fared even less well in the second quarter, raising $8.5 million, far less than necessary to meet the campaign’s commitments. At this point, the campaign let go most of its staff and refocused its plans on winning the New Hampshire primary, skipping the Iowa caucuses. In effect, McCain returned to the outsider strategy that he had used with some success in the 2000 nomination contest.44 He reprised his Straight Talk Express with a No Surrender tour of town halls and grassroots campaigning. One potential bright spot was the fact that about one-fifth of his funds came from donations of less than $200. The campaign began to seriously consider accepting public financing: McCain’s was the first campaign to qualify for matching funds in the 2007–08 election cycle (in August), and it was certified to receive $5.8 million in matching funds in December.

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Given McCain’s own experience in 2000, his campaign was well aware of obstacles presented by the spending limits associated with public funds, and ultimately McCain decided to forgo public financing. Instead, the campaign borrowed $3 million in December and sought an additional $1 million in January to finance its operations. These loans proved to be controversial when it was revealed that McCain’s certified matching funds were discussed as collateral for the loans. In the past, the FEC had regarded the use of certified funds as collateral for campaign loans as tantamount to accepting public financing—and the attendant spending limits. The Democratic National Committee filed a complaint about McCain’s loans, but the FEC was unable to resolve the matter until after the primary season concluded because four vacancies on the commission left the FEC without a quorum and therefore unable to act (the FEC ultimately ruled in McCain’s favor).45 As figures 3-3 and 3-4 show, Romney and Giuliani steadily pulled ahead of McCain in funds raised and cash on hand for the rest of 2007. Romney was able to up this pace, in part, by lending his own funds to his campaign and at an increasing rate: $2.3 million in the first quarter, $6.5 million in the second quarter, $8.5 million in the third quarter, and $18 million in the fourth quarter. Figure 3-4 illustrates the effects of these patterns in terms of cash on hand: Romney and Giuliani built up large positive balances until near the end of 2007, while McCain had much less cash on hand over the entire period. Meanwhile, Mike Huckabee—and most of the rest of the Republican field—showed only modest fundraising results over the election cycle. Under these circumstances, Huckabee might well have benefited from matching funds, but the spending limits might have stymied his campaign eventually, as they did to the Edwards campaign. Both Romney and Giuliani sought to exploit the opening created by McCain’s troubles, but each faced strong opposition from various Republican factions, which, in turn, fueled the fortunes of other candidates. One was Fred Thompson, the favorite of some GOP traditionalists, who entered the race late but was able to raise $21.8 million in the third quarter. Another was Mike Huckabee, a former Baptist minister, who more than doubled his total funds in the fourth quarter (to $9 million by year’s end) and also developed an enthusiastic grassroots following among evangelical activists, organized in part through the Internet. Huck’s Army, the Huckabee volunteer coalition, was in some ways similar to Obama’s cadre of volunteers. A third candidate was libertarian Ron Paul, who raised $19 million

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in the fourth quarter, nearly doubling his previous total. More than twothirds of Paul’s new funds were in donations of less than $200, and most came through the Internet. The outpouring of online funds for “Dr. Paul” was similar to Obama’s Internet fundraising. Giuliani’s response to this opposition was to skip the early contests and focus on the more hospitable political environment of the Florida primary. This strategy allowed him to husband his funds in anticipation of Super Tuesday but took him out of the headlines for many weeks. In contrast, Romney decided to engage his opponents, resulting in a fierce contest with Huckabee in the Iowa caucuses. Outside money was prominent in Iowa: the Club for Growth ran ads against Huckabee, while Common Sense Issues made telephone calls on his behalf. Huckabee came in first in Iowa and Romney second. The Iowa caucuses left Romney’s finances depleted, and in January 2008 Romney loaned a final $6.9 million to his campaign, bringing the total of personal loans to $42.3 million—about what McCain raised in all of 2007 ($42.1 million). A round robin of contests followed in quick succession. First, McCain won New Hampshire, dealing second-place Romney his second successive defeat. Romney briefly revived his fortunes by winning his native state of Michigan and the Nevada and Wyoming caucuses. Then in South Carolina, McCain defeated both Huckabee and Thompson, severely damaging their credibility. Finally, the race turned to Florida, where McCain defeated Giuliani, ending the latter’s campaign. McCain experienced a surge in contributions after his January victories, nearly matching Romney’s January fundraising ($12.7 to $16.7 million) and expanding his cash on hand as well (see figures 3-3 and 3-4). These funds, in combination with the momentum of his previous wins, allowed McCain to compete effectively on Super Tuesday. McCain won the most (nine) and the largest (California, New York, New Jersey, and Illinois) of the states, and thanks to the Republican winner-take-all system, he secured a lion’s share of the delegates as well. Overall, Republican media spending was dominated by Romney, who spent $31.6 million—more than the media spending of McCain ($11.0 million), Giuliani ($5.7 million), and Huckabee ($3.6 million) combined. Romney withdrew from the race shortly after Super Tuesday, but Huckabee continued to campaign until March 4, when McCain’s win in the Ohio primary settled the nomination.

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Bridge Period Finances McCain enjoyed a potential advantage over Obama in that the bridge period began for him in March, three months before it began for his opponent. This period gave McCain a chance to recover from the nomination battles and raise additional funds. As reported in table 3-1, McCain raised $149.4 million during the bridge period—a sum more than twice the total funds he raised during the primary season. During this period he was also able to spend $122.1 million to sustain his campaign and prepare for the general election and then transfer $23 million to various party committees once he formally accepted the Republican presidential nomination. McCain put the bridge period to good use. The length of the Democratic primary season was a potential disadvantage for Obama. However, his successful primary campaign and continued fundraising stood him in good stead. As table 3-1 reveals, he was able to raise another $125.4 million during the three-month bridge period, a sum large enough to cover his campaign expenses in the summer of 2008 as he prepared for the general election campaign. In financial terms, the bridge period was something of a draw. McCain raised more and spent less than Obama. Obama’s bridge period was far shorter than McCain’s. But by the end of the bridge period, McCain still trailed Obama in funds. This pattern differed from 2004, when John Kerry was able to use the bridge period to nearly catch up with Bush in total funds raised. During this period, Kerry raised $187.9 million, more than twice Bush’s $82.1 million. As a result, Kerry trailed Bush in total funds raised by only about $18 million, compared with the more than $240 million deficit between McCain and Obama in 2008. In 2004 Kerry’s average monthly receipts during the bridge period were $31.3 million, and Bush’s were $13.6 million. Hence by the standards of 2004, McCain’s 2008 bridge period performance ($24.9 million monthly average) surpassed Bush but fell well below Kerry. However, Obama’s 2008 performance was extraordinary ($41.6 million monthly average). On June 19, 2008, Obama announced that he would forgo public financing in the general election, along with the requirement that he cease raising and spending private funds. This decision was a reversal of his previous commitment to accept general election funds if the GOP nominee did the same, and it provoked widespread criticism from the media as

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well as from McCain, who quickly asserted that he would take the general election grant. Obama argued that he supported publically financed elections but that “the public financing of presidential elections as it exists today is broken, and we face opponents who’ve become masters at gaming this broken system.” He then returned to an earlier argument that his opponents were funded by “Washington lobbyists and special interest PACs” and allied with “so-called 527 groups, who will spend millions and millions of dollars in unlimited donations.”46 From the perspective of the 2004 election, these arguments had some validity.47 After all, the Swift Boat Veterans and POWs for Truth, a 527 committee, had attacked Kerry right after the Democratic National Convention with remarkable effectiveness. But from the point of view of mid2008, Obama’s claims were somewhat less persuasive: Republican-leaning 527 committees were much less active than they had been in 2004, and there was disarray among Republicans and their allies that would last for the rest of the year. Furthermore, the most active 527 committees were allied with Democrats—and would soon spend heavily in support of Obama. Beyond the possibility of a sudden surge in hostile outside money, Obama’s decision allowed him to use his huge fundraising advantage in the general election. In fact, Kerry had seriously considered forgoing general election public funds in 2004, and both Obama and McCain made a similar decision when forgoing matching funds in 2008. As if to underscore this latter point, the Obama campaign began airing its first general election ad the same day as his announcement to forgo public funds in the general election. McCain soon followed suit on the airwaves, and outside spending—for and against the candidates—began as well. Both Obama and McCain raised significant amounts from other political committees in the bridge period, mostly joint fundraising efforts with their parties ($25.9 and $20.8 million, respectively; see table 3-2), which contributed to financing the bridge period and general election efforts on their behalf. The nomination contest period ended with the national conventions. Both of the major parties received a public grant of $16.4 million to stage their convention, and additional funds were raised by local governments and private donations, totaling $61.8 million for the Democrats and $62.4 million for the Republicans. Much of this money was raised outside of the hard-dollar contribution limits. Corporate donations accounted for the largest portion of the estimated 80 percent of convention costs paid for with private funds. These funds were raised through convention host committees rather than formal party committees. However, some analysts saw

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a strong similarity between these private donations and party soft money, which had been banned by BCRA in 2002.48 This pattern represented a continuation of private financing and lavish expenses of the national conventions evident in 2004. As with the nomination and general election campaigns, convention finance operated largely outside of the public financing system in 2008.

A Requiem for Public Financing? The 2008 presidential election led the way in record-breaking fundraising largely because of the Obama campaign. Although there were increases in other areas, the size and scope of Obama’s finances were extraordinary. However, his campaign’s innovations in online fundraising may well mark a sea change in how presidential elections are financed. When put in context with the activities of candidates as diverse as Hillary Clinton, Mike Huckabee, and Ron Paul, one can discern the outlines of Ronald Brownstein’s “true 21st century campaigns” and what Tim Leberecht calls “disciplined decentralization.”49 Although Leberecht’s description refers to the Obama campaign in celebratory terms, it is illustrative of the possibilities: Can we . . . orchestrate social media, amateur content, and crowdsourced platforms with utmost message discipline on a large scale? Yes, we can. Can we reconcile authenticity and consistency? Yes, we can. Can we combine traditional broadcasting ads with low-fi video clips without diluting the message? Yes, we can. Can we be our own media channel and bypass media without alienating them? Yes, we can. Can we design campaigns that cultivate the small in the big and the big in the small, in other words, campaigns that use direct marketing (phone banking, fundraising) but use them bottom-up and not top-down? Yes, we can. Can we be hyper-targeted and still be inclusive and reach out to everyone? Yes, we can.50 Such a development could mark a profound change in presidential politics. One change that has already taken place is the decreasing relevance of the public financing system. Created in the 1970s in response to the Watergate scandal and other developments in presidential politics, the public financing system was largely irrelevant to the outcome of the 2008

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election. The most straightforward example was the decision of the most competitive candidates to forgo public funds in the nominations process and, in the case of Obama, the general election. This development predated 2008, of course, but it is nearly certain that the most competitive candidates will plan to privately finance their campaigns in 2012. In this regard, the model for the future may be Hillary Clinton as much as Barack Obama. Thus the 2008 campaign may have been a requiem for the public financing system. The decision of candidates to forgo public financing is hardly the least salutary problem with the public financing system. After all, party soft money, sham issue advocacy, 527 committees, and financing of the national conventions all threaten not just the public financing system but the integrity of the mandatory regulations on donations and disclosure as well. And it must be remembered that the presidential candidates who chose to forgo public funds still operated within the mandatory finance regulations, expanding the number and variety of donors. Perhaps more important, they contributed to competitive campaigns and increased both citizen activism and higher voter turnout. Here the growth of online fundraising was critical, but one cannot divorce its use from the motivating political incentives. The central feature of the public financing system was to induce candidates to voluntarily restrain their campaign spending by supplying them with public funds, voluntarily provided by taxpayers.51 This central feature of the system produced complexities and challenges. However, it worked fairly well between 1976 and 1996 because its parameters fit political reality fairly well. During this period, the system helped foster electoral competition and citizen participation. And as political reality changed, the participants initially adapted their strategies and tactics to operate successfully within the system. But eventually the mismatch between the system and political reality became so great that the participants chose to avoid the system all together. From the vantage point of 2008, several of the system’s parameters appear to be especially problematic. Surely the most serious is the spending limits associated with matching funds in the primary season and the general election public grant. It now costs much more to run a competitive campaign than the limits allow. Thus no competitive candidate would agree to such limits, and no candidate who agreed would be competitive. This raises the deeper questions of what spending limit would make sense, and if any such spending limit would work for long in a dynamic political environment such as the United States. Of course, the spending limits

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were regularly adjusted for inflation; that is to say, the purchasing power of a dollar. But they were not adjusted for changes in the items and services that must be purchased by campaigns, which rose in cost at a rate higher than inflation. The spending limits thus did not reflect the practical realities that candidates face. Not all the parameters of the public financing system were even adjusted for inflation. For example, the size of matching funds, the financing qualifications for matching funds, and allowances for fundraising and accounting were basically the same as in 1976. This problem was exacerbated after 2002, when the federal campaign finance laws indexed individual contribution limits for inflation. A $250 match was worth much less out on the campaign trail in 2008 than in 1976, and a maximum of $21 million in matching funds was much less useful in an era when $100 million is seen as the minimum stake in the primary season. It seems unlikely that public resources of this magnitude will matter much to the most competitive candidates, given the present financial realities. One example illustrates this point: The public financing system produced roughly $50 million a year between 2005 and 2008, for a total of $200 million with which to pay for the entire public system. This amount is roughly equal to the $219 million Obama raised in donations of less than $200 during the primary season— not to mention the small-dollar funds raised during the fall campaign. The reality is that the least suspect forms of campaign funds, from individuals making small donations, may now be more available to candidates than public funds. Analysts have worried since its inception about the adequacy of taxpayer funding of the system, and at various points it appeared that the public funds would not be able to meet the obligations of the system. This worry has declined in recent years because the most competitive candidates decided to forgo public financing. But the underlying problem is still there. For example, the percentage of taxpayers who participate in tax checkoff continues to decline. In 2008 the checkoff was used on just 8.3 percent of tax returns, down from 10.1 percent in 2004 and 25.5 percent in 1976 (the high point being 28.7 percent in 1981). No doubt there are many reasons for this pattern, but it does not bode well for the legitimacy of the public financing system. Under the present circumstances, many taxpayers may wonder whether their checkoff is producing anything of value. Furthermore, the number of individuals who make federal campaign contributions may be fast approaching the number of taxpayers who use the checkoff. And it is likely that contributing to the candidates,

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party committees, or interest groups of one’s choice is a more satisfying experience. These patterns prompt a final question: What purpose can public funds achieve in the context of present political reality? Answering this question is the first step toward making the public financing system relevant to presidential politics.52 The alternative is its demise.

Notes 1. On financing the 2004 nominations, see John C. Green, “Financing the 2004 Presidential Nomination Campaigns,” in Financing the 2004 Election, edited by David B. Magleby, Anthony Corrado, and Kelly D. Patterson (Brookings, 2006), pp. 93–125. On 2000, see John C. Green and Nathan S. Bigelow, “The 2000 Presidential Nominations: The Costs of Innovation,” in Financing the 2000 Election, edited by David B. Magleby (Brookings, 2002), pp. 49–78. 2. Ronald Brownstein, “The First 21st-Century Campaign,” National Journal, April 19, 2008 (www.nationaljournal.com/njmagazine/cs_20080416_3324.php [July 2009]). 3. For a detailed look at federal campaign finance law, see Anthony Corrado and others, The New Campaign Finance Sourcebook (Brookings, 2005). 4. In 2008 the national spending limit for candidates who accepted matching funds was $42 million. Candidates were allowed to raise an additional $8.4 million for fundraising purposes (20 percent of the limit) and another $6.3 million for legal and accounting expenses (15 percent of the limit). Federal Election Commission, “Presidential Spending Limits for 2008” (www.fec.gov/pages/brochures/ pubfund_limits_2008.shtml [August 2009]). 5. On the invisible primary in 2008, see Arthur C. Paulson, “The ‘Invisible Primary’ Becomes Visible: The Importance of the 2008 Presidential Nominations, Start to Finish,” in Winning the Presidency, 2008, edited by William J. Crotty (Boulder, CO: Paradigm, 2009), pp. 87–109. 6. On front-loading in 2008, see Stephen J. Wayne, “When Democracy Works: The 2008 Presidential Nominations,” in Winning the Presidency, 2008, edited by Crotty, pp. 48–69. 7. See John H. Aldrich, Before the Convention: Strategies and Choices in Presidential Nominating Campaigns (University of Chicago Press, 1980). 8. Evan Thomas, A Long Time Coming (New York: Perseus, 2009), pp. 33–35. 9. Joe Rospars, director of new media, Obama for America, telephone interview by David Magleby, January 28, 2009. 10. See Candice J. Nelson, “Strategies and Tactics of Fundraising in 2008,” in Campaigns and Elections American Style, 3rd ed., edited by James A. Thurber and Candice J. Nelson (Boulder, CO: Westview, 2010), pp. 93–103.

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11. On this “unparalleled quest for dollars,” see Anthony Corrado and Molly Corbett, “Rewriting the Playbook on Presidential Campaign Financing,” in Campaigning for President, 2008, edited by Dennis W. Johnson (New York: Routledge, 2009), pp. 126–46, 126. 12. Table 3-1 is based on FEC reports of receipts and disbursements adjusted by subtracting repaid loans, offsets to expenditures, and contribution refunds. These numbers draw heavily on analysis in Corrado and Corbett, “Rewriting the Playbook on Presidential Campaign Financing.” Similar analyses of these data were conducted by the Campaign Finance Institute (www.cfinst.org). 13. See Green, “Financing the 2004 Presidential Nomination Campaigns,” p. 100, and Green and Bigelow, “The 2000 Presidential Nominations: The Costs of Innovation,” p. 55. 14. John McCormick, “Candidates May Raise, Return Funds for General Election, FEC Rules,” Chicago Tribune, March 1, 2007, p. A1. 15. Table 3-2 and the following discussion draw heavily on analysis by the Campaign Finance Institute, “After Holding Financial Advantage in Primaries, Obama Likely to Achieve Only Parity with McCain in General Election,” September 25, 2008 (www.cfinst.org/pr/prRelease.aspx?ReleaseID=205 [July 2009]). Some discrepancies between tables 3-1 and 3-2 reflect different methods used to aggregate candidate donation records as well as the dates of the candidates’ finance reports. This section also draws heavily on Anthony Corrado, “FundRaising Strategies in the 2008 Presidential Campaign,” in Campaigns and Elections American Style, 3rd ed., edited by James A. Thurber and Candice J. Nelson (Boulder, CO: Westview, 2010), pp. 105–35. 16. David B. Magleby, “Rolling in the Dough: The Continued Surge in Individual Contributions to Presidential Candidates and Party Committees,” Forum: A Journal of Applied Research in Contemporary Politics 6, no. 1 (2008), art. 5 (www.bepress.com/forum/vol6/iss1/art5 [August 2009]). 17. David B. Magleby, “How the 2008 Elections Were Financed,” in The Change Election: Money, Mobilization, and Persuasion in the 2008 Federal Elections, edited by David B. Magleby (Temple University Press, 2011), pp. 27–32. 18. On Bush’s bundlers, the Pioneers, see Green and Bigelow, “The 2000 Presidential Nominations: The Costs of Innovation,” pp. 59–61. Here and elsewhere, the data on leadership PACs come from the FEC and data on bundlers from the Center for Responsive Politics; for an analysis of the bundlers, see Steve Weissman and Taylor Lincoln, “Fundraising Central: Majority of Presidential Bundlers and Other Fundraisers Hail from Only Five U.S. Industries: Lawyers and Law Firms, Three Finance Industries, and Real Estate,” Campaign Finance Institute, December 12, 2007 (www.cfinst.org/pr/prRelease.aspx? ReleaseID=176 [August 2009]). 19. Joshua Green, “The Amazing Money Machine,” Atlantic, June 2008.

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20. Here and elsewhere, the data on the number of fundraising events come from the Washington Post Presidential Candidate Tracker (projects.washingtonpost.com/2008-presidential-candidates/tracker/ [August 2009]). 21. Nathan L. Gonzales, “Direct Mail Not Dead Yet,” Rothenberg Political Report, February 20, 2009 (rothenbergpoliticalreport.blogspot.com/2009/02/ direct-mail-not-dead-yet_20.html [August 2009]). 22. Green, “Financing the 2004 Presidential Nomination Campaigns,” pp. 106–15; Green and Bigelow, “The 2000 Presidential Nominations: The Costs of Innovation,” pp. 61–63. 23. Joe Rospars, director of new media, Obama for America, quoted in Mike Madden, “Barack Obama’s Super Marketing Machine,” Salon, July 17, 2008 (www.salon.com/news/feature/2008/07/16/obama_data/ [August 2009]). 24. Matthew Mosk, “Obama Rewriting Rule for Raising Campaign Money On-line,” Washington Post, March 28, 2008, p. A6. Also see Jose Antonio Vargas, “Obama Raised Half a Billion Online,” Washington Post, November 20, 2008 (voices.washingtonpost.com/44/2008/11/20/obama_raised_half_a_billion _on.html [August 2009]). 25. Tim Leberecht, “Marketing the President,” Matter/Anti-Matter, CNET News blog, November 10, 2008 (news.cnet.com/8301-13641_3-10092505-44. html?tag=mncol [July 2009]). 26. Christopher Cooper and John Emshwiller, “Fund Race: Obama Outflanks ‘Hillraisers,’” Wall Street Journal, May 8, 2008 (on-line.wsj.com/article/SB1210 20588755375369.html [August 2009]). 27. For example, see Brian C. Mooney, “Technology Aids Outreach Drive,” Boston Globe, February 24, 2008 (www.boston.com/news/nation/articles/2008/ 02/24/technology_aids_obamas_outreach_drive/ [July 2009]). 28. On Obama’s web team, see Tom Lowry, “Obama’s Secret Digital Weapon,” Business Week, June 24, 2008 (www.businessweek.com/magazine/ content/08_27/b4091000977488.htm [August 2009]). 29. David Carr, “Obama’s Social Networking Was the Real Revolution,” New York Times, November 9, 2008, p. A1; Christian Ferry, deputy campaign director, John McCain for President, The Change Election press event, Washington, DC, June 23, 2009. 30. Rospars, interview. 31. For data, see Campaign Finance Institute, “After Holding Financial Advantage in Primaries, Obama Likely to Achieve Only Parity with McCain in General Election”; Corrado, “Fund-Raising Strategies in the 2008 Presidential Campaign”; and Magleby, “Rolling in the Dough.” 32. Green, “Financing the 2004 Presidential Nomination Campaigns,” p. 111. 33. David B. Magleby, “A High-Stakes Election,” in Financing the 2000 Election, edited by Magleby, pp. 9–10.

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34. Green, “Financing the 2004 Presidential Nomination Campaigns,” pp. 110–11. 35. The following narrative draws heavily on the account of the 2008 Democratic nomination contest in James W. Ceaser, Andrew E. Busch, and John J. Pitney Jr., Epic Journey: The 2008 Elections and American Politics (Lanham, MD: Rowman and Littlefield, 2009), pp. 89–130. 36. See, for example, Mark Penn, “The Problem Wasn’t Message, It Was Money,” New York Times, June 8, 2008 (www.nytimes.com/2008/06/08/opinion /08penn.html?_r=1 [August 2010]). 37. Matt Kelley, “Fact Check: A Closer Look at Debate Claims,” Politics, ABC News, February 27, 2008 (abcnews.go.com/Politics/story?id=4355002&page=1 [August 2009]). Also see Obama’s June 22, 2007, speech on lobbyists (www. barackobama.com/2007/06/22/remarks_of_senator_barack_obam_17.php [August 2009]). 38. The data on aggregate fundraising cited here and subsequently are drawn from reports issued by the Campaign Finance Institute (www.cfinst.org/president/dataHistorical.aspx [August 2009]). 39. The data on television advertising cited here come from reports issued by the Wisconsin Advertising Project (wiscadproject.wisc.edu/pressreleases.php [August 2009]). 40. The information on specific primaries makes use of the Democracy in Action website, “Iowa Caucuses” (www.gwu.edu/~action/2008/chrniowa08.html [August 2009]). 41. It is difficult to quantify this labor support for Clinton and Obama. For example, the American Federation of State, County, and Municipal Employees reports having spent $1.3 in partisan communications costs in support of Clinton during January 2008. But it is unclear how much of those funds was spent in the Iowa caucuses. Obama received less support, and much of it appears to have come after Iowa. 42. On Super Tuesday, both candidates spent heavily and nearly equally on television ads in California, Massachusetts, New York, and Missouri. Much less was spent in the remaining nineteen states, but more funds were allocated to the South, especially Georgia and Tennessee. These estimates come from Campaign Media Analysis Group (CMAG) data graciously made available by Evan Tracey. 43. The following narrative draws heavily on the account of 2008 Republican nomination contest in Ceaser, Busch, and Pitney, Epic Journey, pp. 53–88. 44. Green and Bigelow, “The 2000 Presidential Nominations: The Costs of Innovation,” pp. 61–62. 45. Matthew Mosk, “McCain Got Loan by Pledging to Seek Federal Funds,” Washington Post, February 16, 2008, p. A10. 46. Quoted in Shailagh Murray and Perry Bacon Jr., “Obama to Reject Public Funds for Election,” Washington Post, June 20, 2008, p. A1.

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47. Green, “Financing the 2004 Presidential Nomination Campaigns,” p. 118. 48. On the financing of the national conventions in 2008, see the reports of the Campaign Finance Institute, in particular, “Inside Fundraising for the 2008 Party Conventions: Party Surrogates Gather Soft Money While Federal Regulators Turn a Blind Eye” (www.cfinst.org/pr/prRelease.aspx?ReleaseID=192 [August 2009]). 49. Leberecht, “Marketing the President.” 50. Ibid. 51. On the problems of the public financing system, see “Participation, Competition, Engagement: Reviving and Improving Public Funding for Presidential Nomination Politics,” Campaign Finance Institute, September 2003 (www.cfinst. org/president/participation.aspx [August 2009]). 52. For a discussion of possibilities for reform, see Michael Malbin, “Small Donors, Large Donors, and the Internet: The Case for Public Financing after Obama,” Campaign Finance Institute, April 2009 (www.cfinst.org/pr/prRelease. aspx?ReleaseID=228 [August 2009]).

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Financing the 2008 Presidential General Election anthony corrado

T

he 2008 presidential general election marks a turning point in the annals of presidential campaign finance. For the first time since the adoption of the public funding program in 1974, a major-party nominee, Democratic challenger Barack Obama, chose to forgo the public option and rely solely on private fundraising to finance his bid for the Oval Office. Obama’s decision dictated the financial dynamics of the general election and left Republican John McCain, who accepted the $84.1 million public grant, facing the prospect of being outspent by a substantial margin. But the scope of the advantage that Obama ultimately achieved was unexpected. During the general election alone, Obama raised $337 million, four times more than the amount of the public funding grant. Even though McCain had access to resources other than public money, he did not come close to matching Obama’s financial support. As a result, the 2008 election was the most financially lopsided contest since 1972, the last election before the advent of the public funding program, when President Richard Nixon outspent George McGovern by a margin of two to one.1 By demonstrating the financial advantage that could be achieved through private fundraising and winning the presidency without public funds, Obama opened a new path in presidential campaign finance. He illustrated how traditional fundraising practices can be combined with the Internet and other digital technologies to build an extensive base of small donors, thereby highlighting the important role these donors can play in the financing of presidential campaigns. In all, Obama received contributions from almost 4 million individuals during the course of the 2008 campaign, 127

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including almost 2 million who joined his effort during the three months leading up to Election Day.2 The vast majority of these donors made small contributions that served as the foundation of Obama’s financial strength. In fact, during the general election campaign, these small donors gave Obama more money ($114 million) than he would have received from the public grant. Obama rewrote the book on raising general election money and thus established a new model that now stands as a viable alternative to public funding. Obama opted for private funding to free his campaign from the constraints of the public funding system. In particular, he wanted to avoid the public funding spending limit. Although McCain did accept the public grant and its spending ceiling, he did not rely solely on public money in his efforts to compete with Obama. McCain followed the examples of President George Bush and his challenger, John Kerry, who creatively supplemented their public funds in 2004 with party funds, as well as private contributions that could be used to finance specific administrative expenses. Consequently, public funds represented only a portion of the money spent in support of McCain’s candidacy. The Republican Party channeled more than $100 million into the presidential contest through a variety of means and also financed an extensive voter turnout operation. These efforts helped McCain make the most of his limited public dollars and reduced Obama’s financial advantage. But even the combined resources of McCain and his party were not enough to match Obama’s prodigious fundraising. The two candidates thus pursued decidedly different financial strategies in the race for the White House. This chapter examines these strategies to highlight the changes taking place in the campaign finance system and to show how the methods of financing influenced the ways in which the campaigns were conducted. Readily apparent in 2008 were the problems that have plagued the public funding program in recent elections and the reasons why the 2008 election signals the end of public funding as the accepted means of financing a presidential general election campaign.

Obama’s Choice In 2004 John Kerry seriously considered refusing public money for his general election campaign against incumbent President George Bush.3 At the time, Kerry was experiencing a surge in financial support that would eventually produce $235 million for his primary campaign. He was there-

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fore capable of raising more than the $74.6 million provided by public funding that year. But Kerry eventually chose to accept the public money, knowing that his party and allied Democratic groups would also be spending funds to promote his candidacy. Similarly, President Bush opted for public funding, even though he had raised $270 million during the primaries and did not have to make a decision until after Kerry had announced his choice, since Kerry’s convention nomination took place well before Bush was formally nominated by the Republicans. Kerry’s decision to take public funds gave Bush a strategic advantage. Because the Democrats held their nominating convention at the end of July, while the Republicans did not convene until the end of August, Kerry had to finance a thirteen-week general election campaign with his limited public money, as compared with a nine-week campaign for Bush. During the month between the conventions, Bush was able to spend unlimited amounts from his primary funds. Kerry, however, was restricted to public funds, and he was hesitant to spend large sums in August, since he wanted to preserve his resources to match Bush’s spending later in the election. The Democratic Party filled the gap in the postconvention period by making independent expenditures in support of Kerry, but these expenditures were controlled by the party, not by Kerry or his campaign team, and they were focused on attacking Bush rather than emphasizing the merits of Kerry’s candidacy. In reflecting on the 2004 election, Kerry cited his acceptance of public funds as one of the “biggest mistakes” of the campaign; as a result of that decision he had “to harbor [his] resources in a different way” and “didn’t have the same freedom” to spend money and control his own message. Because of the spending limits imposed under the public funding rules, he “was forced to pull out of three states—Colorado, Missouri, and Virginia—three weeks before the election because the public financing system didn’t give you enough money to compete.”4 In highlighting the strategic problems created by the limits of public funding, Kerry made clear the disadvantages that accompany this funding. His opinion reflected the view that had become prevalent among most political observers: that public funding no longer provided the resources needed to wage a competitive general election campaign. When Obama faced the decision on public funding in 2008, he was in a better strategic position than Kerry had been four years earlier. He was not challenging an established incumbent, and the Democrats had

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changed the timing of their convention so that it would be held in late August, only a week before the Republican convention. By the end of May, Obama had an established fundraising base of 1.5 million donors and already had raised more money than Kerry had during the entire 2004 primary campaign.5 It was widely expected that Obama would raise tens of millions of dollars more throughout the summer—as Kerry had— and that these monies would be spent on activities designed to benefit his fall campaign. Although Obama had endured a hard-fought, highly competitive primary contest that forced him to spend most of the money he had raised through May on the battle for the party nomination, this spending also offered some advantage. It essentially allowed him to establish a foundation for his general election campaign. He had already built strong organizations in a large number of states and spent large sums on advertising in most of the general election battlegrounds. Furthermore, owing to his ample resources, he was able to maintain many of these organizations even after the primary voting had ended as a preparatory step toward the general election. By the end of the primaries in early June, he had made substantial investments in key Electoral College states. Obama could have followed the model established in 2004 and accepted public funds. But he was not about to repeat Kerry’s mistake. Accordingly, Obama announced in a video message sent to supporters by e-mail on June 19, 2008, that he would not participate in the public funding program, despite earlier statements declaring that he would work with his opponent to “aggressively pursue an agreement” that would “preserve a publicly financed election.”6 In explaining his position, Obama contended that the system was “broken” and that his opponents had “mastered the art of gaming this broken system,” implying that he would be at a strategic disadvantage if he were to abide by the restrictions of the public option. Obama specifically noted his concern about the unregulated spending of organized groups, which could spend “millions and millions of dollars in unlimited donations” against him, and his concern about the head start held by the presumed Republican nominee McCain, “who has, in fact, been running a privately financed general election campaign since February.”7 Obama further claimed that a campaign privately funded by small donors essentially met the goal of the public funding system, since it reduced the influence of large donors in the political process.8 At the time Obama announced his decision, his advisers believed that he could raise $200 million to $300 million for the general election, not counting any funds received by the Democratic National Committee.9

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Although there was no guarantee that he would attain this goal, his fundraising to that point suggested that it was a realistic objective. By the end of June, Obama had already received $338 million in primary contributions.10 If he could generate only half that amount from his proven donors for the general election and continue to recruit new donors, he would be well on the way to achieving this goal. Moreover, Obama was able to begin his general election fundraising while continuing to solicit contributions for the primary campaign. In accordance with a Federal Election Commission opinion issued in March 2007 in response to a query initiated by the Obama campaign, a candidate was allowed to raise general election funds during the primary period, so long as these funds were maintained in a separate general election account and conformed to contribution limits.11 Thus Obama could ask an individual who gave the maximum permissible amount of $2,300 to his primary campaign to give an additional donation of up to $2,300 to his general election account. By announcing his decision as soon as the nomination contest was effectively over in June, Obama gave his campaign more than four months to focus on general election fundraising. This would prove to be more than enough time not only to reach his goal but to exceed it. In addition to providing Obama with the ability to capitalize on his fundraising strength, the decision to refuse public funds ensured that he would be able to exert better control over the resources deployed in the campaign. Instead of having to rely on party operatives or allies for financial support, as Kerry and Bush had in 2004, Obama could concentrate his resources on his own operation. He did not have to cede control over advertising or organizational activities to the independent decisions of party staff. Although the party’s objective is to help its nominee, the independent expenditures made by party committees entail the risk that the messages broadcast or resource allocations made might not conform to the candidate’s strategic priorities. By refusing public funds, most of the money spent in the campaign would flow through the campaign committee, which would allow more efficient coordination of the activities that took place during the election. Obama campaign manager David Plouffe considered this ability to control the flow of resources to be a principal benefit of sticking to private funding. In his view, “control of all aspects of our campaign was more important . . . than the overall dollar amount.”12 McCain, a leading sponsor of the 2002 Bipartisan Campaign Reform Act (commonly known as McCain-Feingold) and a longtime advocate of

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campaign finance reform, had declared early in 2007 that he would accept public funding in the 2008 general election if his Democratic opponent did.13 Obama’s decision created an opening for McCain to reassess his position and perhaps follow his opponent’s lead. But McCain stood firm, stating soon after Obama’s announcement that he would still take the public grant.14 McCain’s was a principled stand, but it also reflected the practical realities of the state of his fundraising efforts. Although he had wrapped up the Republican nomination by the beginning of March, his campaign had only raised $110 million by the end of June. His fundraising picked up in the weeks leading up to the convention, but collecting substantially more than the amount provided by public funding would have been a challenge and would have required him to commit a substantial amount of time to fundraising, especially since his campaign had had limited success attracting contributions online. Instead of engaging in a fundraising race with Obama, the most pragmatic approach was to accept public funds and rely on various forms of party support to try to counter Obama’s advantage.

General Election Fundraising Since the candidates had chosen different methods of funding, they conducted their respective campaigns under different rules. In accordance with the public funding regulations, McCain was subject to a spending limit of $84.1 million (the amount of the public grant). He also was prohibited from raising additional private contributions for his campaign, with one exception—he was allowed to raise money from private donors to pay for general election legal and accounting compliance expenses. These compliance funds, known as GELAC funds, are exempt from the spending ceiling but are subject to federal contribution limits ($2,300 per individual and $5,000 per political action committee [PAC]). They can be used to cover the costs incurred to comply with the law and must be deposited in a separate bank account established for this purpose. Permissible compliance expenditures include the costs of legal and accounting services as well as the share of a campaign’s payroll and overhead expenses associated with compliance activities, which is limited to no more than 10 percent of the sums spent on these items. These funds also may be used to finance the costs of “winding down” a campaign, including postelection administrative expenses and any expenses incurred in an electoral recount.15

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As a publicly funded candidate, McCain was also barred from using any of the money remaining from his primary campaign to support his bid in the general election. This prohibition was particularly relevant in 2008 because McCain ended the primaries with a significant amount of leftover cash. At the end of September, McCain reported $29.6 million in remaining primary funds.16 These funds could not be used by McCain to finance his campaign’s activities, but they could be used for a number of purposes, including the support of party committees or other candidates. Under the provisions of federal law, a federal candidate may transfer unlimited sums from his or her campaign account to party committees. In 2004 Kerry and Bush each took advantage of this option. During the general election period, Kerry transferred $23.6 million in excess primary funds to the Democratic National Committee, $3 million each to the Democratic congressional and senatorial campaign committees, and $10.8 million to selected state parties in targeted general election states, including Pennsylvania, Michigan, and Florida. Bush also transferred most of his remaining primary funds to party committees, sending $26.5 million to the Republican National Committee (RNC) and $1 million each to the Republican senatorial and congressional campaign committees.17 McCain also employed this approach. In October 2008 he transferred a total of $18.6 million to party committees from the cash remaining in his primary campaign account. But McCain directed funds exclusively to Republican state party committees in general election battleground states. He transferred $3.5 million to the party in Wisconsin, $3 million to Ohio, and $2.9 million to North Carolina. The parties in Florida and Virginia each received $2 million; Pennsylvania was sent $1.6 million; Colorado, Missouri, and New Mexico each gained $1 million, and Nevada $500,000.18 Although the expenditures financed with these transferred funds are difficult to determine from disclosure reports, the timing of the transfers from middle to late October suggests that the funds were used to help finance party voter mobilization and turnout efforts in these states. In this way, McCain was able to use his excess primary cash in an indirect way to advance his general election prospects. As a privately funded candidate, Obama had to abide by the contribution limits, but he was subject to no limits on spending. He could spend as much as he could raise, and his administrative costs were included as part of his campaign expenses rather than as exempted costs financed separately through GELAC money. He could also spend any leftover primary

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money during the general election period (another advantage gained by forgoing public funds). By the end of August, he had about $35 million in unspent primary money, which when combined with contributions in his general election account gave him $77 million in cash that could be used in the general election campaign. Obama thus began the general election campaign with almost as much available cash as he would have received had he accepted public funding—and he could still raise more.

Obama Obama’s prodigious fundraising was the dominant story throughout the 2008 election cycle, and in this regard the general election was no different from the earlier stages of the campaign (see chapter 3). In the general election alone, he raised $336.9 million from private donors, which was more than the amount of private money received by any previous candidate in the primary and general elections combined. In the ten weeks between his convention nomination and Election Day, Obama raised almost $300 million, an average of close to $30 million a week. No other candidate had ever amassed money on such a grand scale. To put this in perspective, Obama raised more in the ten weeks leading up to the election than the Democratic National Committee raised during the entire two-year election cycle.19 Obama was able to amass large sums quickly through his state-of-theart website and its social networking hub, My.BarackObama.com, which became known as MyBO.20 MyBO set a new standard for the recruitment and engagement of a vast network of financial supporters and volunteers. It was designed to build an online relationship with supporters by providing them with a central location through which they could make a contribution, solicit donations from others, receive campaign information, volunteer, and mobilize others to vote. MyBO basically provided the campaign with an infrastructure capable of efficiently incorporating new donors into the campaign while at the same time maintaining contact and encouraging additional contributions from a broad base of previous donors. MyBO offered supporters a variety of ways to participate in campaign fundraising efforts. In addition to providing standard web-based fundraising tools, such as a prominently featured “Donate” button that could be used to make online contributions by credit card, the campaign employed more interactive techniques to enhance donor participation. Individuals who made a contribution were often asked to participate in a matching

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program, through which an additional contribution would be matched by another donor. Supporters could sign up for a recurring gift program that allowed them to make donations of as little as $25 on a regular basis by credit card. Users could also establish their own fundraising page or affinity group on the MyBO site to encourage their friends or contacts to make a donation and then watch their personalized “fundraising thermometers” climb as individuals gave in response to their requests. These innovations gave donors a more active role in the campaign’s fundraising efforts and promoted the creation of a corps of thousands of individuals who were willing to solicit their own networks for campaign dollars. This tactic proved so successful that the campaign set up a grassroots finance committee that helped train supporters in how to collect donations from their friends, relatives, and co-workers, essentially educating them in how to become microbundlers—volunteer fundraisers who solicited or bundled together small contributions from diverse individuals. By the end of the general election, the Obama campaign had benefited from the efforts of 70,000 individuals who solicited their own networks for campaign dollars, which produced an estimated $30 million over the course of the entire campaign.21 The efficacy of Obama’s online fundraising platform was evident in the crucial month of September, when the campaign needed to raise a staggering sum to meet its budget objectives. Obama exceeded all expectations, generating the unprecedented monthly total of $150 million, including $100 million in online contributions.22 During this month, he attracted 632,000 new contributors, which brought his total number of donors to more than 3 million.23 Obama continued to raise substantial sums of money and attract new donors throughout October and the days leading up to Election Day. In the first two weeks of October, the campaign took in an additional $36 million; at that time, in the words of Obama’s chief of staff, Jim Messina, the money was “just raining down.”24 Before the month ended, another $79 million had been received, with millions more given in the days leading up to the election and thereafter. As in the primaries, the key to Obama’s financial strength was his ability to attract small contributions from large numbers of donors online. In fact, in the general election small donors played an even larger role in Obama’s fundraising than in the primary election. In assessing the role of small contributors in the financing of the Obama campaign, it is important to distinguish between small donations

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and small donors. Donations of less than $200 do not have to be itemized in federal disclosure reports and are thus reported on campaign disclosure filings as unitemized contributions. Unitemized contributions are typically cast as small donations in federal campaign finance parlance and are often taken as an indication of the role of small donors in a campaign. But the amount received in unitemized contributions does not give an exact measure of the role of small donors, since it does not account for the multiple contributions in amounts of less than $200 that an individual may make. Many of those who made small donations of $20, $50, or more to the Obama campaign during the general election gave more than once and eventually contributed a total of $200 or more, which, under federal law, is the sum that triggers public disclosure of the aggregate amount contributed by an individual. The best measure for judging the role of small donors therefore is the aggregate amounts contributed by individuals and the amount of money raised from donors who gave less than $200 in total—that is, the small donors. According to an analysis by the nonpartisan Campaign Finance Institute, small donors who gave an aggregate of $200 or less to Obama’s general election campaign contributed a total of $114.1 million, which represented 34 percent of the campaign’s general election funds. During the primaries (which encompassed a much longer period, from the beginning of Obama’s formal candidacy through to the nominating convention), small donors provided more money in total to Obama’s campaign ($121 million), but this sum represents a slightly smaller share of his funding (30 percent).25 Overall, their contributions alone provided more money than the amount Obama would have received if he had taken the public funding grant. While small donors were an especially noteworthy component of Obama’s fundraising, he raised substantial sums from donors across the financial spectrum. He received $88.4 million, 26 percent of his general election money, from individuals who gave the maximum permissible amount of $2,300. Most of these large donations were solicited through joint fundraising operations conducted in association with Democratic party committees. He raised another $54.7 million (16 percent of his total) from individuals who made aggregate donations of at least $1,000 but less than $2,300. Individuals who gave more than $200 in aggregate but less than $1,000 contributed a total of $79.1 million, which represented 23 percent of the campaign’s general election receipts. Obama thus garnered most of his general election resources from the small and large

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end of the donor spectrum, small donors accounting for about a third of his funding and those who gave $1,000 or more about 42 percent. The breadth and scope of his fundraising efforts allowed him to amass more than enough money to exceed the amounts that McCain and the Republican Party were able to muster against him.

McCain One of the ostensible purposes of the public funding program is to free candidates from the need to personally raise campaign dollars. Even with public funding, McCain engaged in a significant amount of fundraising activity in connection with the general election campaign. Like other recent presidential nominees, McCain raised contributions to finance his GELAC expenses and also participated in party fundraising efforts to help generate the monies the party would use to support his bid for the Oval Office. But 2008 differed from previous elections in the way that most of this money was collected. To generate the sums needed to compete with Obama, McCain made extensive use of joint fundraising committees, a tactic that Obama and the Democrats also adopted. Federal regulations allow a candidate and a national or state party committee to establish a joint fundraising committee as a means of undertaking fundraising activities designed to benefit all the participants.26 These committees, which are often called victory committees or victory funds, are established through written agreements between a candidate and one or more party committees that designate the victory committee to raise funds in behalf of the candidate and the committee or committees and then allocate any proceeds to the participants on a specified or prorated basis. These committees often sponsor events at which individuals can make contributions to a candidate, a national party, and sometimes a state party at the same time. Their primary objective is to solicit large contributions from individual donors and PACs, typically in amounts equal to the maximum permissible contribution that may be given to each of the committee’s participants. For example, under the adjusted contribution limits established by the Bipartisan Campaign Reform Act (BCRA), an individual could give up to $108,200 in aggregate contributions to federal candidates, party committees, and PACs in the two-year 2008 election cycle. An individual could give up to $2,300 per election to a candidate, up to $28,500 a year to a national party committee, and up to $10,000 a year to each state party committee for federal election purposes. Within the $108,200 aggregate

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contribution limit, the maximum aggregate amount an individual could contribute to party committees was $65,500. Thus at a joint fundraising event an individual could give $2,300 to a candidate’s general election account (or, in the case of a publicly funded candidate like McCain, $2,300 to a GELAC account), up to $28,500 to the Republican National Committee, and up to $10,000 to a Republican state party committee. A joint fundraising committee could therefore accept contributions that totaled as much as $40,800 ($2,300 plus $28,500 plus $10,000). If the committee was staging a fundraiser before the nominating convention, an individual could give another $2,300 to the candidate’s primary election account for a total of $43,100. A joint fundraising committee thus provides presidential candidates with a means of raising money for their campaign committees, as well as for their parties, despite the restrictions on fundraising imposed by the public funding rules. From the party perspective, it allows them to host fundraisers featuring the presidential nominee, which serves to enhance the status of these events. The monies received by the parties can then be used to pay for the activities they conduct in connection with the presidential campaign. Joint fundraising operations are also an efficient means of raising money, since the events can focus on partisan supporters capable of giving large amounts and thereby raise substantial amounts quickly at a single event for the candidate and party committees involved. Presidential candidates and their parties have used joint fundraising committees in prior elections, but never as extensively or as early as in 2008. Beginning in April 2008, McCain worked with the RNC and state parties to establish joint fundraising committees.27 The principal committees were the McCain Victory Committee, McCain Victory 2008, and, after the selection of Sarah Palin as the Republican vice-presidential nominee, McCain-Palin Victory 2008. These committees primarily raised money for the McCain campaign and the RNC but also generated funds for state parties in Colorado, Minnesota, New Mexico, Wisconsin, Missouri, and Pennsylvania.28 All of these states were considered to be competitive in the general election. In addition, McCain and the national party established committees with state party organizations in Ohio, Florida, Kentucky, and California.29 The Obama campaign followed suit, signing a joint fundraising agreement with the Democratic National Committee (DNC) in early May.30 Before this, he and Hillary Clinton had agreed in February to participate in a DNC joint fundraising committee called Democratic White House

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Victory Fund that was set up to accept money for the party and its eventual presidential nominee.31 The committee raised $9.6 million, most of which ($8.7 million) was received before the end of June. Once the nomination was decided, Obama and the DNC established the Obama Victory Fund to conduct joint fundraising operations. In mid-July another committee, the Committee for Change, was established as a vehicle for receiving contributions from donors who had already given the maximum amount to Obama and the DNC through the Obama Victory Fund but had not yet reached the maximum permissible amount on aggregate contributions to party committees. This committee was used to raise funds that were directly transferred to state party organizations to help finance general election field operations in eighteen states.32 As noted in table 4-1, both sides generated significant sums through joint fundraising committees. McCain and the Republicans raised a total of $172 million. Obama and the Democrats raised more than $203 million. The amounts generated by these committees reflected the emphasis placed on large contributions. According to an analysis of Federal Election Commission (FEC) records conducted by the New York Times, by the end of September more than 1,800 individuals had contributed $25,000 or more to McCain’s victory committees, including more than 300 who each gave $50,000 or more. Almost 2,000 individuals gave $25,000 or more to Obama’s committees during the same period, including more than 500 who gave $30,000 or more.33 Most of the money raised by these committees was transferred to national and state party committees, but each of the presidential nominees also received sizable sums. The Republican committees generated $119.2 million for the RNC, $20.9 million for state parties, and almost $32 million for McCain. McCain received $20.3 million for his primary campaign account and $11.6 million for his GELAC account. Thus about 18 percent of McCain’s total funds was garnered from Republican joint fundraising committees. Obama raised even more as a result of the Democrats’ efforts. Of the $203.7 million raised through these committees, $86.9 million, or 43 percent of the total amount received, was transferred directly to Obama’s campaign. These committees also sent $97.6 million to the DNC and $19 million to state parties. Obama therefore raised almost three times as much for his campaign through joint fundraising committees as McCain did. Moreover, joint fundraisers were the major source of the money Obama received from donors who gave the maximum permissible amount.

19,027,052 175,050,000 9,598,779 203,675,831

Democratic committees

Committee for Change Obama Victory Fund Democratic White House Victory Fund Total

0 0 148,779 148,779

Democratic nominee account

Democratic National Committee 0 88,100,000 9,450,000 97,550,000

0 8,405,244 550,457 217,905 1,284,100 0 1,088,245 23,707 0 0 11,569,658

10,191,098 33,349,059 612,451 1,077,076 2,159,499 0 69,769,466 915,823 0 1,152,948 119,227,421

McCain compliance account (GELAC)

19,027,052 0 0 19,027,052

State parties

0 8,933,565 980,387 735,436 2,598,079 360,357 4,129,744 2,931,649 0 265,678 20,934,897

State parties

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Source: Based on disclosure filings reported to the FEC.

Obama for America

Total amount transferred

McCain Victory Committee McCain Victory 2008 McCain Victory Ohio McCain Victory Florida McCain Victory California McCain Victory Kentucky McCain-Palin Victory 2008 McCain-Palin Victory California McCain-Palin Victory Michigan McCain-Palin Victory Ohio Total

Republican National Committee

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0 86,950,000 0 86,950,000

991,842 15,378,785 1,454,453 296,333 1,997,425 198,337 0 0 0 0 20,317,174

11,182,940 66,066,653 3,597,748 2,326,750 8,039,104 558,694 74,987,455 3,871,179 0 1,418,627 172,049,150

Republican committees

McCain 2008

Total amount transferred

Dollars

Table 4-1. Joint Fundraising Committee Activity, 2008 Presidential General Election

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In addition to this joint fundraising activity, McCain raised millions of dollars from private donors for his GELAC account. By the end of the campaign, he had amassed $46.4 million in GELAC money, almost four times the $12.2 million taken in by Bush in 2004.34 McCain’s total was much higher than Bush’s largely because of the funds transferred from joint fundraising committees and $13.1 million in transfers from his primary campaign.35 These primary committee transfers largely consisted of contributions made by donors who exceeded the $2,300 maximum for the primary election and designated any amount contributed beyond this limit as a donation to the compliance fund. These transfers were combined with about $22 million in other contributions raised by the McCain committee to make up his GELAC total. But much of this money proved to be of little use, since GELAC funds can only be used to finance compliance and certain administrative costs. As of November 24, 2008, McCain had spent a total of $16.9 million from his GELAC account, leaving close to $30 million unspent at the end of the campaign.

Party and Interest Group Spending The presidential contenders participated in joint fundraising activities because the money raised could be used to support their respective campaigns for the presidency. In 2004 the DNC and the RNC spent more than $200 million on broadcast advertising and other forms of communication to assist their nominees. The parties also spent tens of millions of dollars indirectly supporting them by financing volunteer programs and voter mobilization efforts designed to encourage party supporters to get out and vote.36 In 2008 the parties were expected to play a similar role, so the candidates had an interest in ensuring that they would have the necessary funds. But Obama’s decision to rely on private funding altered the strategic calculus. Since Obama could receive and spend an unlimited amount of money on his own, donors who wanted to support his candidacy could give to him directly; they did not have to shift their giving to the party as a means of pursuing their political preference. More important, his decision reduced the demand placed on the party to spend money on his behalf. The Democrats were freed from what has become the common strategic context in a presidential race—the need to support a publicly funded nominee who is limited in what he can spend. The Republicans, on the other hand, not only had to supplement McCain’s resources but bore the

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additional burden of helping him compete against an extraordinarily well funded opponent. Obama’s financial success also may have affected the behavior of interest groups and nonparty political committees. These organizations engaged in a variety of electioneering activities during the 2008 election season, but they were not as active as they had been in 2004 (see chapter 7). This was especially true of Section 527 organizations, the independent nonparty political committees named for the section of the Internal Revenue Code under which they qualify for tax-exempt status. These organizations, as well as other organized groups, spent significant amounts of money in 2004, in large part because organizations associated with the Democrats expected that the party’s nominee would be significantly outspent in the election by President Bush and the Republican Party. This led some groups, particularly America Coming Together and the Media Fund, to raise and spend tens of millions of dollars in the hope of defeating Bush. This, in turn, encouraged groups aligned with the Republicans to raise and spend millions of dollars to defend Bush and defeat Kerry. The 2008 race proved to be dramatically different. While the prospect of an Obama presidency encouraged some interest group electioneering on both sides of the political aisle, organized groups played a relatively minor financial role in the contest—especially as compared with 2004—and apparently had little effect on the outcome of the race. Given his fundraising strength, Obama did not need substantial spending by partisan allies to be competitive. Most of the campaign activity on the Democratic side was confined to labor unions and well-established progressive groups such as MoveOn.org, who sought to mobilize their members to vote for Obama. Republicans had little incentive to mount significant 527 committee operations since even if they were successful in raising money, they were unlikely to be able to match Obama’s spending. Their behavior also might have been influenced by a lack of enthusiasm for McCain. Conservative groups and religious organizations had criticized McCain over the years on a number of issues, including campaign finance reform and immigration law. In particular, McCain had been a leading critic of 527s and had called for more stringent regulation of these groups. Whatever the reasons, most of the Republicans’ traditional allies focused their spending on the congressional contests, where they hoped to limit Democratic gains and avoid a filibuster-proof Senate. Consequently, interest group spending was not a prominent feature of the presidential landscape.

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Party Spending Most of the party electioneering in 2008 took place on the Republican side. Given Obama’s financial position, the DNC did not have to commit substantial sums of money to the presidential contest and could instead devote most of its resources to other priorities. The committee contributed only $7.5 million in direct assistance to Obama, including $6.4 million spent in coordination with his campaign and $1.1 million spent independently. The independent expenditures, which were focused on opposing McCain rather than promoting Obama, included $637,000 that was spent in April and May, before the Democratic nominee was determined and well before the start of the formal general election period. With respect to coordinated spending, the national committee spent $4.6 million on media advertising and $1.8 million on mail and postage. Yet these sums, though noteworthy, represented only a small portion of the amount the party was allowed to spend under federal law. The RNC, by contrast, was in the position of having to help its nominee combat a much better financed opponent. Accordingly, the RNC spent more than twelve times as much as the DNC on direct candidate assistance. The committee took advantage of all the means available to support its nominee, including coordinated expenditures, independent expenditures, and hybrid advertising. The party also financed voter outreach and mobilization efforts, as did the Democrats. Federal campaign finance rules allow the national party committees to spend a limited amount of money in coordination with a presidential nominee. In 2008 the limit on such spending by each party was $19.1 million. The candidate or members of his or her campaign staff can consult with party committee personnel on how this “coordinated money” will be spent, so the candidate or the candidate’s staff can influence how these party funds are allocated. The ability to consult on these disbursements makes them a particularly valuable resource, since they essentially function as an additional component of a presidential candidate’s budget. The RNC spent $18.9 million in coordination with the McCain campaign, according to FEC disclosure reports.37 More than half of this amount, $11 million, was spent on media advertising. Most of the rest of the money was used to pay for direct voter contact in the form of mail ($6 million) and telemarketing ($1.5 million). Coordinated funds were also used to pay for clothing and accessories, notably for vice-presidential candidate Sarah Palin, expenses that generated considerable media attention

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and controversy when the initial expenditures were first disclosed. By the end of the election, the RNC had reported $334,335 in disbursements for clothing and accessories, makeup services, and other personal candidaterelated items. In addition to these coordinated expenditures, the RNC spent $53.5 million independently of the McCain campaign. These expenditures, which must be made without any consultation between the candidate or the candidate’s campaign staff and the party, can expressly advocate the election or defeat of a candidate and are not subject to spending limits. The monies used to finance these efforts, however, must come from contributions raised according to federal contribution limits. Because the amount that may be spent is not limited, independent expenditures have become the principal means used by party committees to provide direct assistance to candidates. The monies spent independently by the RNC were used almost exclusively to finance negative advertising against Obama. The airing of independent advertisements began in the summer, when the RNC launched its first wave of advertising with a $3.4 million purchase in early July. The RNC spent another $2.3 million on advertising on August 25, the first day of the Democratic National Convention. The vast majority of party independent advertisements, however, were broadcast in late September and October, when the party used its resources to try to help McCain match Obama’s advertising. The party aided McCain further by spending money on what are known as hybrid or allocated advertisements. Hybrid ads, first used in the 2004 presidential race, allow a candidate to share the costs of an advertisement with the party without having to count the amounts disbursed against the coordinated spending limit. This tactic represents a loophole in the regulations that was created by the rules governing the ways parties can allocate their expenditures and share costs with candidates or other political committees. In the case of hybrid ads, a candidate and the party share the cost of an advertisement. This is permissible so long as the ads include a generic party message that advocates the party or its candidates as a whole, along with a message promoting the presidential candidate. The costs of the ad can then be divided between the party and the presidential campaign. Some party professionals therefore refer to these ads as fifty-fifties, since the candidate and party committee each typically pay for 50 percent of the ad.38

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In 2004 Bush and the RNC used this tactic to great effect, spending $45.6 million in all on hybrid advertisements.39 In 2008 Obama’s financial advantage induced the Republicans to make even greater use of this option. Overall, McCain and his party spent $57.9 million on hybrid advertising; half of this sum, about $29 million, was financed with McCain’s public funds. This $57.9 million total included $48.6 million of television advertising, $6.6 million of radio advertising, and about $3 million of advertising through Hispanic media.40 Hybrid advertising thus helped McCain stretch the value of his limited public dollars by facilitating the purchase of two dollars of advertising time for each dollar that he disbursed. The emphasis placed on such ads can be discerned by putting this spending into broader perspective. McCain spent more money on hybrid advertising than he spent on McCain-only media, expenses for which were not shared with the party ($22.1 million). Overall, McCain allocated $51 million to media, which represented 61 percent of his total public money; 57 percent of this amount ($29 million) was devoted to hybrid ads. In fact, total hybrid spending ($57.9 million) exceeded the amount spent independently by the party on advertising ($53.5 million). Hybrid advertisements thus constituted a significant share of the advertising purchased on the Republican side. In all, when viewed in terms of the number of spot advertisements aired by McCain, the party, and both together, hybrids represented about one of every three spots.41 Finally, both parties assisted their nominees indirectly by spending tens of millions of dollars on voter identification and mobilization programs designed to encourage party supporters to turn out to vote. These efforts were undertaken primarily by state party committees, whose electionrelated activities before the general election had to be financed with federal funds, since they qualified as federal election activity under the regulations established by BCRA.42 While the exact amounts spent by the party organizations cannot be discerned from party disclosure reports, the scope of the activity is suggested by the amounts of money transferred to state parties by the candidates and joint fundraising committees. As noted previously, McCain transferred $18.6 million from his primary campaign account, and Republican joint fundraising committees transferred $20.9 million to state party organizations. Democratic joint fundraising committees transferred $19 million to state parties. Obama transferred an additional $32.7 million to state party committees from his

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campaign account.43 Most of the money transferred from Obama’s campaign went to presidential electoral battlegrounds, including $5.5 million to Florida, $3 million each to Ohio and Virginia, and more than $2 million each to Wisconsin, North Carolina, Pennsylvania, and Missouri. Colorado and Michigan each received $1.9 million, and more than $1 million was given to Nevada ($1.6 million), Indiana ($1.4 million), and Minnesota ($1.2 million) by Obama’s campaign.44 To arrive at an accurate estimate of total spending by state party committees, any monies raised independently by state parties or spent by the national committees must be added to these sums. In short, both parties spent tens of millions of dollars on election activity that was designed to help mobilize support for the presidential contenders.

Interest Group Electioneering Organized groups or other nonparty political committees can finance presidential electioneering activities in a variety of ways, so long as they do not coordinate their activities with a candidate, which would make their expenditures a contribution to the candidate and thus subject to federal contribution limits. Like party committees, interest groups and political committees may make independent expenditures that expressly advocate the election or defeat of a presidential candidate, but they must finance these activities with funds raised in accordance with federal contribution limits. Typically, organizations finance independent expenditures from monies raised through a federal PAC or from federally permissible contributions deposited in a separate bank account. Political committees, including the independent political committees known as Section 527 organizations, are also allowed to support candidates through electioneering communications, which were first defined under BCRA. Electioneering communications are broadcast communications that feature a presidential candidate, are aired within sixty days of the general election, and are targeted at a constituency eligible to vote for the candidate. The law states that these communications may not be financed with money received from corporate or labor union treasuries. However, as a result of the Supreme Court’s 2007 ruling in Federal Election Commission v. Wisconsin Right to Life, there are some instances in which corporate or labor union financing is permitted, depending on the content of an advertisement (see chapter 2).45 Contributions from individuals may be used to finance such communications, regardless of the size of the donation.

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Labor unions and corporations may also make use of another category of federal spending known as communication costs. These are the costs these entities incur to communicate election messages to their members, including expenditures made to advocate the election or defeat of a presidential candidate. While the amount that may be spent communicating with members is not limited, a labor union or corporation must disclose to the FEC any expense in excess of $2,000 that advocates the election or defeat of a federal candidate.46 In practice, such expenditures are primarily made by labor unions. Most of the money spent on campaign communications by organized groups in 2008 was disbursed in the form of independent expenditures. From the end of August to Election Day, organized groups spent $65.4 million on independent expenditures in the presidential race. Independent spenders report their disbursements as either for a candidate or opposed to a candidate, in accordance with federal disclosure rules. It is therefore possible to determine how these expenditures break down in terms of the monies spent for or against a particular candidate. In the 2008 presidential election, the major share of independent expenditures was made to help elect Obama. Interest groups spent $38.5 million on advertising and other activities that expressly supported Obama or opposed McCain; the bulk of this spending, $30.8 million, consisted of efforts advocating Obama rather than opposing McCain. Groups spent $26.8 million during this period in support of McCain, and most of this amount, totaling more than $19 million, was spent on electioneering efforts that opposed Obama. The bulk of interest group independent expenditures on the Democratic side thus consisted of pro-Obama messages, while most of this spending on the Republican side financed antiObama, rather than pro-McCain, messages. A small number of organizations were responsible for two-thirds ($44.3 million) of the independent spending that occurred during the general election (see table 4-2). As is often the case in presidential contests, labor unions were among the most active groups: four unions spent a total of more than $27 million to help elect Obama. These included the Service Employees International Union ($13.5 million); United Automobile, Aerospace, and Agricultural Implement Workers of America ($4.9 million); the American Federation of State, County, and Municipal Employees ($2.3 million); and the American Federation of Teachers ($2.0 million). Obama also received the support of the progressive organization MoveOn.org, which spent $2.7 million in independent expenditures.

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Table 4-2. Independent Expenditures by Top Groups, 2008 Presidential General Election a Dollars Group Service Employees International Union Committee on Political Education (SEIU COPE) National Rifle Association of America Political Victory Fund UAW Voluntary Community Action Program (UAW-V-CAP) National Right to Life Political Action Committee Moveon.org Political Action American Federation of State, County, and Municipal Employees Advancing Wisconsin Inc. American Federation of Teachers Planned Parenthood Action Fund Inc. Progressive Future Incorporated Republican Majority Campaign Defenders of Wildlife Action Fund Total

Total 13,481,327 6,946,238 4,860,571 4,427,241 2,685,050 2,312,723 2,096,725 1,997,375 1,890,711 1,485,029 1,137,904 1,021,241 44,342,134

Source: Based on data reported to the FEC. a. Expenditures made during the general election period beginning August 30, 2008.

McCain’s principal supporters were the National Rifle Association ($6.9 million) and the National Right to Life Committee ($4.4 million), both of which sponsored extensive campaigns attacking Obama. Groups also financed electioneering communications in their attempts to influence the outcome of the race. Total expenditures on electioneering advertisements sponsored by the top twenty groups during the period from late August to Election Day amounted to $17.8 million (see table 4-3). Almost all of this money was spent on advertisements that opposed either Obama or McCain. Groups that broadcast advertisements opposing Obama spent $9.2 million. Groups that sought to help Obama by opposing McCain spent close to $6 million. In addition, The ONE Campaign, a global advocacy group committed to fighting poverty and preventable disease, spent $2.6 million on advertising that referred to both Obama and McCain and encouraged them to make a commitment to address the issue of global poverty. Vets for Freedom, a nonpartisan organization established by combat veterans of the wars in Iraq and Afghanistan, spent the most on electioneering advertisements in the general election, disbursing a total of $4.5 million in an effort to help McCain. Other groups that campaigned

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Table 4-3. Electioneering Communications Spending by Top Groups, 2008 Presidential General Electiona Dollars Group Vets for Freedom Health Care for America Now The ONE Campaign RightChange.com Republican Jewish Coalition Service Employees International Union Judicial Confirmation Network BornAliveTruth.org Focus on the Family Action Bring Ohio Back United Mine Workers of America Winning Message Truth From American Workers Campaign Money Watch Association of Community Organizations for Reform Now Americas Majority Latinos for Reform USACTION Rural Votes Wisconsin Right to Life Total

Total 4,464,323 3,842,158 2,593,567 1,752,198 1,364,502 717,000 548,063 505,016 440,341 413,128 314,382 214,928 178,324 131,553 99,988 97,914 62,505 36,367 34,100 10,500 17,820,857

Source: Based on disclosure reports filed by these groups and reported to the FEC. a. Figures include only amounts reported in the period from August 26 to November 4, 2008.

against Obama included a number of conservative organizations and social issue or pro-life groups: RightChange.com ($1.8 million); the Republican Jewish Coalition ($1.4 million); and the Judicial Confirmation Network ($548,000), an organization that supports the appointment of judges who abide by a strict constructionist approach to constitutional interpretation. Advertisements opposing Obama were also broadcast by Focus on the Family ($440,000), BornAliveTruth.org ($505,000), and Wisconsin Right to Life Committee ($10,500). The leading organization opposing McCain was Health Care for America Now, a large coalition consisting of 1,000 organizations that advocates comprehensive health care reform. The organization spent a total of $3.8 million on advertising, which represented about 64 percent of the electioneering communications spending undertaken to help Obama. Other leading supporters included two unions, the Service Employees International Union ($717,000) and the United Mine Workers of America

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($314,000), and Bringing Ohio Back ($413,000), a 527 organization that sought to educate Ohio citizens on economic, health care, and educational issues. Labor unions spent additional sums communicating with their members and mobilizing them to vote. In the general election period, unions reported communications costs totaling $30.8 million. The unions reported that all but $1 million of this sum was spent to help Obama. According to FEC disclosure filings, unions disbursed $23.7 million, almost 87 percent of their total communications costs, on efforts to promote Obama. Unions also spent $6.1 million on communications that opposed McCain. Of the $1 million spent to help McCain, $705,000 was devoted to communications opposing Obama and $300,000 was spent promoting McCain.47

Financial Strategies and Their Consequences Even with the substantial support he received from the RNC and organized groups, McCain was unable to match the campaign war chest amassed by Obama. Obama therefore maintained an impressive financial advantage throughout the general election, which allowed him to mount the most extensive field operation and advertising effort witnessed in a presidential campaign to date. Furthermore, Obama was able to coordinate and control his campaign activities in a way that McCain could not. Much of the money spent to advance McCain’s candidacy was out of his control. At times this approach yielded disparate or incongruent messages, which served to undermine the efficacy of his campaign. The different financial strategies used by the candidates thus affected the conduct of their respective general election campaigns in meaningful ways. Obama’s financial advantage was the most obvious consequence of the candidates’ strategic approaches. Even with the support he received from the party, McCain could not match the $337 million that Obama raised for the general election, a figure that did not include any party spending. McCain and the RNC spent a combined $231.8 million, including the public grant, GELAC funds, and all party coordinated, independent, and hybrid expenditures, which was significantly more than the $144.0 million that Bush and the RNC spent in comparable ways in 2004 (see table 4-4). McCain, therefore, did not have a poorly funded campaign. In fact, funds generated by McCain and his party equaled the sum spent by Kerry and the DNC in 2004 and exceeded the amount spent by Bush and

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Table 4-4. Campaign Finances, 2004 and 2008 Presidential General Elections Millions of dollars 2008

2004

Obama

McCain

Bush

Kerry

— 336.9 — 336.9

84.1 — 46.4a 130.5

74.6 — 12.2 86.8

74.6 — 8.9 83.5

Party Coordinated Independent b Hybrid c Party subtotal

6.4 1.1 0 7.5

18.9 53.5 28.9 101.3

16.1 18.2 22.9 57.2

16 120.3 12 148.3

Groups and political committees Independent d Electioneering communicationse Communication costs Group subtotal

38.5 6 29.8 74.3

26.8 9.2 1 37

7.6 36.8 1.3 45.7

35.2 18 23 76.2

418.7

268.8

189.7

308

Candidate Candidate, public Candidate, private Candidate, GELAC Candidate subtotal

Total

Source: Based on data reported to the FEC. Unless noted otherwise, figures represent funds spent in the period from the date of the national nominating convention through the end of the election. a. The total amount deposited in McCain’s GELAC account. Of this amount, $16.9 million had been spent by the end of the election year. b. All DNC and RNC independent expenditures, including disbursements made before the national nominating conventions. Total for each candidate includes expenditures in support of the candidate and against his opponent. c. Only the share of hybrid spending that can be attributed to the party, since the monies spent by the candidate are included in the candidate’s funds. In 2004 Bush and the RNC spent a total of $45.8 million on hybrid advertising, while Kerry and the DNC spent $24 million. In 2008 McCain and the RNC spent a total of $57.9 million. d. Totals for each candidate include expenditures in support of the candidate and against his opponent. e. Totals for 2008 do not include the $2.6 million spent by The ONE Campaign on advertisements that referenced both Obama and McCain.

the RNC in 2004 by $88 million. Yet Obama and the DNC still held an advantage of more than $112 million. And this figure represents a best case for McCain, since it includes all of the $46.4 million he raised in GELAC money. If only the GELAC money spent during the campaign is taken into account, Obama’s advantage exceeded $140 million. Moreover, the funds spent by organized groups on advertising and other communications served to magnify Obama’s general election advantage. Groups that financed independent expenditures, electioneering communications, and member communications spent $74 million to help Obama, compared with $37 million spent in support of McCain.

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When these funds are considered, Obama’s overall financial advantage rises to more than $175 million (if only the GELAC funds spent by McCain are counted).

Expanding the Playing Field Obama’s financial superiority allowed him to wage a broad-based campaign that gave him a decided advantage in the crucial weeks leading up to Election Day. He built a campaign organization that expanded the electoral map and, combined with his online capabilities, allowed him to build an extensive volunteer operation. In August, Obama had already established at least 336 campaign offices to McCain’s 101.48 As Election Day approached, the Obama campaign and the Democratic Party operated at least 770 offices nationwide, as compared with only 402 offices for McCain and the Republican Party.49 At the end of the primaries the Obama campaign’s staff numbered 750 to 800 persons; by mid-October that number had grown to 4,500, as compared with 1,100 for McCain and the Republicans.50 By the end of the campaign, Obama’s paid staff had grown further, totaling more than 5,000 individuals.51 Obama was able to finance ground operations not only in the traditional swing states but also in a number of states that have reliably voted Republican in the past several elections, including Georgia, Indiana, Montana, North Carolina, and Virginia.52 He had the resources needed to realize what campaign manager David Plouffe cast as the campaign’s “number one strategic goal”: a “big playing field” that offered “different ways to win [the] election.”53 By the beginning of October, the Obama campaign had built extensive operations in all of the key Electoral College states. For example, Obama had eighty offices in Pennsylvania as compared with McCain and the Republicans’ thirty; seventy-six in Ohio as compared with forty-five for McCain and the Republicans; forty-seven in North Carolina to McCain’s twenty; forty in New Mexico as compared with about a dozen; and forty-three in Indiana as against only a handful for the Republicans.54 This willingness to campaign aggressively and spend resources wherever an electoral opportunity was present increased the financial demands on McCain and stretched his limited public dollars, since he had to defend traditional Republican states while contesting the critical swing states. Consequently, the party had to spend more money than planned in support of McCain in states like Indiana, Georgia, North Carolina, and Virginia, and even then they were outspent by substantial amounts.

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Obama was also able to control the airwaves, especially in targeted swing states. For example, in the first week of October, Obama spent $17.5 million on advertising, as compared with a combined total of $10.9 million for McCain and the RNC.55 During this week, McCain and his party were able to match Obama’s advertising in Colorado, Michigan, New Mexico, Ohio, Pennsylvania, and Wisconsin, but in other states they lagged far behind. Obama outspent his opponents by a margin of more than eight to one in North Carolina, three to one in Florida and Virginia, two to one in New Hampshire, and three to two in Nevada.56 In the second-to-last week of the campaign, Obama spent $21.5 million on television advertising, more than twice the combined $9 million disbursed by McCain and the Republicans.57 In the final week, Obama spent more than $25 million.58 After the election, Kenneth Goldstein, the director of the Wisconsin Advertising Project, concisely summarized the scope of Obama’s superiority, noting that “in all the swing states, it was a 3-to-1, 4-to-1, 5-to-1 advantage.”59 Moreover, Obama had the financial wherewithal to move beyond traditional broadcast advertising and employ more innovative means of communicating with voters. Once it became clear in September that Obama would raise the money needed to meet campaign budget targets, his staff decided to prepare a thirty-minute primetime television advertisement to be broadcast on national networks the Wednesday before Election Day. This was the first half-hour ad broadcast nationally by a presidential candidate since 1992, when billionaire Ross Perot was running for the presidency as an independent candidate. The Obama ad appeared on CBS, NBC, Fox, and the Spanish-language network Univision as well as MSNBC, BET, and TV One. It drew an estimated audience of 33 million viewers and cost the campaign more than $3 million.60 Obama also made extensive use of online advertising, which is not surprising given his campaign’s emphasis on online communications and social networking. Obama spent more than $16 million on online advertising during the course of the 2008 election cycle, as compared with only $3.6 million spent by McCain. Most of Obama’s online spending, an estimated $7.5 million, paid for ads on Google; some of the money was used to buy display and text ads in Google’s AdSense network, and some was used for ads appearing in search results on Google’s website. Other networks receiving Obama advertising dollars included Yahoo ($1.5 million), the AOL-owned Advertising.com ($947,000), and Centro ($1.3 million), a media company that facilitates ad buys on local media sites, including

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TV station websites. The campaign also sought to build its social network communities by purchasing advertising on Facebook, MySpace, and BlackPlanet.com, Facebook receiving the largest sum ($643,000).61 Although specific breakdowns for primary versus general election spending are not available, Obama’s emphasis on online advertising rose substantially in September and October; the campaign spent millions for web ads in October alone. During this period, a number of the most innovative tactics were employed. The campaign began advertising on blogs, paying Blogads and its owner, Pressflex, $149,000 for ads that were probably designed to encourage early voting or voter turnout on Election Day.62 Obama also made presidential campaign history by becoming the first White House contender to place campaign ads in video games. In October, he purchased at least $94,000 of advertising through Microsoft’s in-game ad service.63 This service provided Obama with in-game ads that were delivered through eighteen video games ranging from Guitar Hero 3 to NASCAR 09 and NFL Tour. The ads appeared in games as banners or billboards with an image of Obama, the slogan “Early Voting Has Begun,” and a reference to the website VoteForChange.com, a site maintained by the Obama campaign. This site, which was launched on August 25 and also was advertised on Facebook, allowed users to register to vote online, obtain absentee voter information, and locate a polling station. By mid-October, the site had received nearly 5 million visits; 774,000 users downloaded a voter registration form.64 Most notably, by using Internet protocol addresses of online players as a targeting mechanism, these ads were focused on ten battleground states where early voting was available.65 As its online activity suggests, the Obama campaign was able to mount a diverse advertising mix. In addition to airing general advertisements that promoted Obama in national and spot markets, the campaign ran specific tracks of advertisements in selected markets targeted at particular demographics: women, seniors, minorities, and young voters. The online ads, for example, were specifically designed to reach young voters. The campaign oriented some of its advertising around big events, including the Olympics and World Series, which campaigns often avoid owing to the cost of buying time on such broadcasts.66 It also employed diverse formats, including some sixty-second or two-minute ads, as well as the traditional thirty-second spot. The campaign had an agreement with Dish Network and DirecTV for Obama On Demand. During the campaign,

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45 million viewers went to On Demand and watched Obama content, staying on the site for an average of twelve minutes.67 What this meant strategically was that Obama was able to overwhelm McCain’s advertising in most of the competitive general election states. Because of the limits imposed on public funding, the McCain campaign had to make more difficult strategic choices. It had to decide how to best allocate resources, both in terms of where to advertise and how much to spend over time. It also was more constrained in the content of its advertising because election rules required that the hybrid McCain-RNC advertising have a party message and not just a candidate message. For the Obama campaign, the choices were not so pressing. Generally, Obama countered the critical attacks waged by McCain with negative campaign ads of his own. In fact, he ran more negative advertisements than did McCain.68 But the negative ads were supplemented with positive advertisements and often run with yet another track of ads designed to persuade targeted demographic groups.69 So, as a whole, the dominant share of Obama’s communications was devoted to positive messages. Furthermore, Obama had more tactical flexibility than McCain in carrying out his advertising effort. His fundraising success afforded him the capacity to respond to new opportunities with new spending. For example, when opinion polls conducted in early October indicated that Obama might have a chance to be competitive in West Virginia, his campaign began to purchase advertising time in the state.70 McCain could not afford such luxuries. In his effort to compete with Obama, he was forced to make tough choices and trade-offs, such as his decision to pull out of Michigan in order to devote resources to other states.71

The Problem of Control McCain was in a strategically difficult position not only because of differences in the volume of advertising, but also because of the disparity in the quality or substance of the messages that were aired. Because Obama controlled most of the advertising that was broadcast in support of his candidacy, he was able to advance a coordinated and unified message. With the exception of the ads financed by independent groups, which constituted a minor share of the messages broadcast on the Democratic side, the content of the ads broadcast during the general election was based on decisions made by Obama’s advisers. The ad content focused on the campaign’s central message and themes, prominently featured Obama, clearly

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advocated his election, and contained Obama’s logo and disclaimer. The ability to control content thus allowed the campaign to build its brand, frame its messages in the ways the campaign considered most likely to be effective, and urge viewers in no uncertain terms to vote for Obama. McCain was unable to orchestrate his advertising in a similar way because of his limited resources and his need to rely on the RNC and partisan allies for advertising support. The McCain campaign sought to extend its control over the messages being broadcast during the election through the use of hybrid advertisements and communications financed with party coordinated funds, since these methods allowed the campaign to work with the party in producing ads. Most of these communications took the form of hybrid advertisements, since, as noted earlier, this approach allowed more “bang for the buck” when purchasing airtime with limited public dollars. The trade-off inherent in this approach is that the content must be divided between the candidate and a party message. In practice, this means that each thirty-second ad is divided into three parts: about twelve to thirteen seconds for the candidate, a similar amount of time for the party, and about five seconds for the required voice disclaimer (for example, “I’m John McCain and I approve this message”).72 This type of advertising often involves a less direct or fractured message in support of the candidate. The problem McCain faced is evident from the hybrid advertisements that appeared in the race. One hybrid television advertisement, titled “Ambition,” had a script that read as follows: Announcer: Obama’s blind ambition. When convenient, he worked with terrorist Bill Ayers. When discovered, he lied. Obama: blind ambition, bad judgment. Congressional liberals fought for risky sub-prime loans. Congressional liberals fought against more regulation. Then the housing market collapsed, costing you billions. In crisis, we need leadership, not bad judgment. John McCain [voiceover]: I’m John McCain and I approve this message.73 Another television advertisement, titled “Unethical,” flashed pictures of Obama, Democratic Senate majority leader Harry Reid, Speaker of the House Nancy Pelosi, and McCain in succession, while the announcer spoke: Announcer: Obama rewards his friends with your tax dollars. Tony Rezko, $14 million. Allison Davis, $20 million. Kenny Smith,

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$100,000. That’s unethical. Congressional liberals promise to raise your taxes to reward their friends with wasteful pork. Taxes for you, pork for them. Who’s gonna stop em? Congressional liberals? Or him? John McCain [voiceover]: I’m John McCain and I approve this message.74 This hybrid radio spot featured country music star Hank Williams Jr.: Hank Williams Jr.: Hello. This is Hank Williams Jr. When Barack Obama said folks like you and me were bitter, and clinging to guns and religion, I knew he just doesn’t understand small-town America. We love our God. And we love our guns, especially handed down from our grandfathers. We resent it when liberals like Obama question our way of life. Don’t be bitter. Vote McCain. Announcer: Congressional liberals want to increase spending by nearly a trillion dollars. And raise taxes on folks making $42,000 a year to pay for it. Congressional liberals call it “taxing the rich.” We call it “out of touch.” No wonder they criticize our values but expect us to accept theirs. Congressional liberals—out of touch with our America. Paid for by McCain-Palin 2008 and the Republican National Committee. McCain: I’m John McCain and I approve this message.75 As these examples illustrate, the content of hybrid advertisements typically contained diverse messages in order to meet the requisites of the federal regulations that make this tactic possible. Consequently, McCain was unable to deliver a consistent, “signature” message throughout the campaign. In the words of McCain senior adviser Steve Schmidt, “These hybrid ads made no sense.”76 The advertising conducted independently of the McCain campaign further complicated this mixed-message problem. The RNC’s independent expenditures, which exceeded the sum spent by the McCain campaign on broadcast advertising, were focused on negative attacks against Obama rather than positive messages advocating McCain. Similarly, the bulk of the spending on independent and electioneering communications by interest groups and 527s on the Republican side was concentrated on messages opposing Obama. Of the $46.4 million spent by groups to help McCain, $39.2 million, or 85 percent, was reported as money spent on messages opposing Obama. In other words, advertising that attacked or

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was critical of Obama exceeded positive McCain advertising by a margin of five to one. If the RNC’s independent spending is added to this total, the gap grows to $73.4 million opposing Obama against $6.9 million advocating McCain, a margin of roughly ten to one in favor of negative advertising. In contrast, the independent advertising done by groups and 527 committees supporting Obama was reported as mostly positive. Independent expenditures and electioneering communications by groups in support of Obama totaled $44.5 million, with $30.8 million, or 69 percent, spent on communications supporting Obama rather than opposing McCain. In other words, spending on positive advertising that promoted Obama exceeded spending on negative advertising against McCain by a margin of two to one. If the independent advertising done by the DNC and the communications costs reported by labor unions are added to the total, the gap widens to $54.5 million in spending on pro-Obama communications compared with $15.5 million spent on anti-McCain messages, a margin of more than three to one. The financial strategies adopted by the presidential candidates thus resulted in diverse outcomes with respect to the communications strategies. Obama was able to control the content of his own advertising, and the comparatively minor independent advertising expenditures made in his behalf tended to reinforce the positive messages of his campaign. McCain, however, was forced to employ a more mixed-message approach, and the significant amount of advertising created beyond his control by the party and interest groups was aimed at attacking Obama. This certainly contributed to perceptions that McCain was spending “more time attacking Obama than explaining what he would do as president,” a view expressed by six out of ten voters by mid-October. Conversely, about the same share of voters thought Obama was spending more time explaining his views than attacking McCain.77

Conclusion Money was not the determinative factor in explaining the outcome of the 2008 presidential race. What drove the election’s dynamics were the fundamental concerns of the voters—a failing economy that eventually led to the worst economic crisis since the Great Depression, an increasingly unpopular war in Iraq, and a widespread perception that the nation was on

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the wrong track. But money did play a role in helping Obama secure victory. At a minimum, Obama’s financial superiority allowed him to build a broad ground organization, which, combined with his online operations, gave him the capacity to capture the support that increasingly came his way and convert newly identified supporters into voters. It also ensured that his message of change, in an election in which the vast majority of the electorate was seeking change, penetrated the electorate and rose above the general din of election-year advertising. In fact, by the end of the election, tracking polls conducted by the McCain campaign showed that 64 percent of the electorate remembered seeing an Obama advertisement, as compared with only 12 percent who remembered seeing an advertisement by McCain. Bill McInturff, McCain’s pollster, described the scope of this disparity as “a wave on a chart I’ve never seen before in a campaign.”78 The most important aspect of campaign finance in 2008, however, was the lesson conveyed to future candidates. The 2008 experience shattered the expectation that public funding will continue to be the principal means of financing a presidential general election campaign. By forgoing public funds, Obama demonstrated the advantages that can be achieved with private financing. The lesson campaign strategists will draw from the election is that McCain’s choice was a mistake. In taking the public money, he placed himself at a significant strategic disadvantage and faced a financial gap that even the party could not help him overcome. Consequently, future candidates will view the Obama campaign as the new model of presidential campaign finance, a model they will all try to emulate. This is not to say that no candidate will use public funds in the future. While all will hope to follow in Obama’s footsteps, his model may prove to be difficult to replicate, given the unique dimensions of his campaign— the historic nature of his candidacy, his hold on the mantle of change, his success in harnessing the power of new technologies, the fervor he generated in a new generation of online activists and web-savvy young voters, and his prospect of electoral victory. But given Obama’s success, future presidential hopefuls will in all likelihood opt for private financing in order to compete financially and control the resource decisions made in a campaign. Only a candidate who proves incapable of raising more than the amount of the public grant or who decides there is an advantage in relying on party spending is likely even to consider the public option. The 2008 election thus marked the end of the public funding era that began in response to the Watergate scandal. No longer will public funding

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be the resource of first choice. What was once a given—campaigns financed with public funds—will now be relegated to a last resort.

Notes 1. Herbert E. Alexander, Financing the 1972 Election (Lexington, MA: Lexington Books, 1976), pp. 85–86. In 1972 Nixon and his campaign’s affiliated committees spent $62 million in the general election, as compared with the $30 million spent by the campaign committees affiliated with McGovern. 2. Initial reports published immediately after the election estimated that Obama had more than 3 million donors. See Jose Antonio Vargas, “Obama Raised Half a Billion Online,” Washington Post, November 20, 2008 (voices. washingtonpost.com/the-trail/2008/11/20/obama_raised_half_a_billion_on.html [January 2010]). But David Plouffe, Obama’s campaign manager, has stated that the campaign had almost 4 million donors. See David Plouffe, in “The General Election,” in Campaign for President: The Managers Look at 2008, edited by Harvard University, Institute of Politics (Lanham, MD: Rowman and Littlefield, 2009), pp. 161–216, 181. By the end of the primary period, the Obama campaign had received contributions from more than 2 million donors. See David Plouffe, The Audacity to Win: The Inside Story and Lessons of Barack Obama’s Historic Victory (Viking, 2009), p. 254, and Foon Rhee, “Obama Counts on 2 Million; Reaches Milestone in the Number of Individual Donors,” Boston Globe, August 15, 2008, p. A25. 3. For a discussion of public funding in the 2004 presidential election, see Anthony Corrado, “Financing the 2004 Presidential General Election,” in Financing the 2004 Election, edited by David B. Magleby, Anthony Corrado, and Kelly D. Patterson (Brookings, 2006), pp. 127–31. 4. John Kerry, interview by Tim Russert, Meet the Press, NBC, transcript, April 9, 2006 (www.msnbc.msn.com/id/12169680/page/4/ [January 2010]); and John Kerry, interview by Tom Brokaw, Meet the Press, NBC, transcript, November 2, 2008 (www.msnbc.msn.com/id/27502133/ns/meet_the_press/ [January 2010]). 5. Michael Luo and Jeff Zeleny, “Obama, in Shift, Says He’ll Reject Public Financing,” New York Times, June 20, 2008, p. A1. According to FEC disclosure reports, Obama had raised $266 million by the end of April 2008, $31 million more than John Kerry raised during the entire 2004 primary campaign. 6. Barack Obama, “Opposing View: The System Is Broken,” USA Today, June 20, 2008, p. 12A; Peter Nicholas and Janet Hook, “Barack Obama Rejects Public Funding of His Campaign,” Los Angeles Times, June 20, 2008 (articles.la times.com/2008/jun/20/nation/na-campaign20 [January 2010]).

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7. Luo and Zeleny, “Obama, in Shift, Says He’ll Reject Public Financing”; Obama, “The System Is Broken.” 8. Obama, “The System Is Broken.” 9. Luo and Zeleny, “Obama, in Shift, Says He’ll Reject Public Financing.” 10. This is the amount reported in the Obama for America monthly disclosure report filed with the FEC for the election cycle up through June 30, 2008. 11. See Federal Election Commission, Advisory Opinion 2007-03 (http://saos. nictusa.com/saos/searchao?SUBMIT=continue&PAGE_NO=-1). 12. Plouffe, in “The General Election,” p. 181. 13. Democracy 21, “Reform Groups Urge Senator Obama to Reaffirm the Commitment He Made Last Year to Use Public Financing,” press release, February 15, 2008 (www.democracy21.net/index.asp?Type=B_PR&SEC=%7B91 FCB139-CC82-4DDD-AE4E-3A81E6427C7F%7D&DE=%7B6754C630-51EC -4B19-A44F-1160D8CAC5AA%7D [January 2010]). 14. Larry Eichel, “Opting Out So He Can Cash In,” Philadelphia Inquirer, June 20, 2008, p. A01. 15. 11 C.F.R. 9033.3 and 9004.11. Also see Federal Election Commission, Advisory Opinion 2004-35 (http://saos.nictusa.com/saos/searchao?SUBMIT=continue &PAGE_NO=-1). 16. Based on the amount reported in McCain’s monthly FEC disclosure report as of September 30, 2008. 17. Corrado, “Financing the 2004 Presidential General Election,” pp. 132–33. 18. Federal Election Commission, “2008 Presidential Campaign Finance Activity Summarized,” press release, June 8, 2009 (www.fec.gov/press/press 2009/ 20090608PresStat.shtml [January 2010]). These transfers are itemized on line 29 of the pre– and post–general election reports filed by John McCain 2008, Inc. 19. The Democratic National Committee raised a total of $260 million during the 2008 election cycle. 20. This discussion of Obama’s online fundraising is drawn from Anthony Corrado, “Fund-Raising Strategies in the 2008 Presidential Campaign,” in Campaigns and Elections American Style, edited by James A. Thurber and Candice J. Nelson, 3rd ed. (Boulder, CO: Westview, 2009), pp. 115–16. 21. Vargas, “Obama Raised Half a Billion Online.” 22. Ibid. 23. Peter Overby, “Obama’s $150 Million Changing Rules of the Game,” Morning Edition, National Public Radio, October 20, 2008 (www.npr.org/ templates/story/story.php?storyId=95882376 [January 2010]). 24. Quoted in Ryan Lizza, “Battle Plans: How Obama Won,” New Yorker, November 17, 2008, p. 52. 25. Campaign Finance Institute, “All CFI Funding Statistics Revised and Updated for the 2008 Presidential Primary and General Election Candidates,”

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press release, January 8, 2010 (www.cfinst.org/pr/prRelease.aspx?ReleaseID=236 [January 2010]). 26. See 11 C.F.R. 9304.8. 27. Kimberley A. Strassel, “McCain’s Campaign Finance Revelation,” Wall Street Journal, April 25, 2008, p. A13. 28. T. W. Farnham, “McCain Uses Fund to Raise $62.3 Million,” Wall Street Journal, July 16, 2008 (online.wsj.com/article/SB121617969988057495.html [January 2010]); Federal Election Commission, “Joint Fundraising Committees Authorized by Presidential Campaigns,” October 21, 2008 (www.fec.gov/press/ bkgnd/pres_cf/PresidentialJointfundraising.shtml). 29. McCain also established a committee with the Michigan Republican Party, but this committee received no money, probably because the McCain campaign decided to pull its staff out of the state and not aggressively contest Michigan in the general election. See Ryan C. Secord, “Democrats Confident about Elections, See Granholm on Supreme Court,” Capital News Service, October 17, 2008 (blog.mlive.com/cns/2008/10/democrats_confident_about_elec.html [January 2010]). 30. Foon Rhee, “Democrats Announce Joint Fundraising Effort,” Boston Globe, May 14, 2008 (www.boston.com/news/politics/politicalintelligence/2008/ 05/democrats_annou.html [January 2010]); Michael Luo and Mike McIntire, “McCain to Rely on Party Money,” New York Times, May 19, 2008, p. A1. 31. Mark Halperin, “Release on Democratic Fundraising Agreement,” The Page, Time blog, February 23, 2008 (thepage.time.com/release-on-democraticfundraising-agreement/ [January 2010]). 32. Matthew Mosk and Sarah Cohen, “Big Donors Drive Obama’s Money Edge,” Washington Post, October 22, 2008, p. A1; Fredreka Schouten, “McCain Raises Cash While Limited to Public Funds; Obama Also Aided by Money outside His Campaign,” USA Today, September 10, 2008, p. 4A. 33. Michael Luo and Griff Palmer, “In Fine Print, a Proliferation of Large Donors,” New York Times, October 21, 2008, p. A1. 34. Federal Election Commission, “Presidential Campaign Receipts [1996–2008]” (www.fec.gov/press/press2009/20090608Pres/1_OverviewPresFin Activity1996-2008.pdf [January 2010]). 35. The total for the amount transferred from the McCain primary account to the compliance account is based on the transfers to the John McCain 2008 General Election Compliance Fund and the McCain-Palin Compliance Fund noted in FEC disclosure filings during the period from March 1 through December 31, 2008. 36. Corrado, “Financing the 2004 Presidential General Election,” p. 143. 37. Federal Election Commission, “Party Financial Activity Summarized for the 2008 Election Cycle: Party Support for Candidates Increases,” press release, May 28, 2009; revised August 5, 2009 (www.fec.gov/press/press2009/05282009 Party/20090528Party.shtml [January 2010]); in particular, see “Party Activity in

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Presidential Campaigns” (www.fec.gov/press/press2009/05282009Party/11_Party ActPres.pdf). The details concerning the ways coordinated funds were spent are based on an analysis conducted by the author of itemized disbursements listed in party disclosure reports. 38. See, for example, Rich Beeson, RNC political director, in “Political Party Panel,” in Electing the President, 2008: The Insiders’ View, edited by Kathleen Hall Jamieson (University of Pennsylvania Press, 2009), pp. 151–67, 151. 39. Anthony Corrado, “Financing the General Election,” in Financing the 2004 Election, edited by Magleby, Corrado, and Patterson, pp. 126–48, 138. 40. Figures provided by the McCain campaign in an e-mail to the author from Richard Davis, McCain-Palin campaign manager, December 2, 2009. A copy of this message is in the possession of the author. 41. Beeson, in “Political Party Panel,” p. 151, and chart 22, “Spot Count by Percent,” p. 152. 42. Anthony Corrado, “Party Finances,” in The New Campaign Finance Sourcebook, edited by Anthony Corrado and others (Brookings, 2005), p. 175. 43. Kenneth P. Vogel, “FEC: President Obama Funneled Money to Swing States,” Politico, June 9, 2009 (www.politico.com/news/stories/0609/23543.html [January 2010]). 44. Federal Election Commission, “Transfers to Party Committees from Obama for America” (www.fec.gov/press/press2009/20090608Pres/5_Obama CmpgnTranParties.pdf [January 2010]). 45. Federal Election Commission v. Wisconsin Right to Life, Inc., 551 U.S. 449 (2007). 46. See 2 U.S.C. 441b and 11 C.F.R. 114.3. 47. Based on data reported to the FEC. The author acknowledges Bob Biersack of the FEC for his assistance in compiling these totals. 48. Corrado, “Fund-Raising Strategies in the 2008 Presidential Campaign,” p. 126. 49. Christian Ferry, deputy campaign director for the McCain campaign, reports that McCain had 402 offices (e-mail communication with David B. Magleby, June 30, 2009). Others report that the campaign had 370 field offices. See T. W. Farnham and Brad Haynes, “Democrats Far Outspend Republicans on Field Operations, Staff Expenditures,” Wall Street Journal, November 3, 2008, p. A4. 50. David Plouffe, in “Campaign Management and Field Operations,” in Electing the President, 2008, edited by Jamieson, pp. 34–54, 48; Farnham and Haynes, “Democrats Far Outspend Republicans.” 51. Farnham and Haynes, “Democrats Far Outspend Republicans”; Plouffe, in “Campaign Management and Field Operations,” p. 48. 52. Liz Sidoti, “With Money, Obama to Try to Widen the Battleground,” USA Today, June 20, 2008 (www.usatoday.com/news/politics/2008-06-20-77171331_ x.htm [January 2010]).

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53. David Plouffe, quoted in Shailagh Murray, Juliet Eilperin, and Robert Barnes, “A Positively Negative Home Stretch,” Washington Post, November 3, 2008, p. A1. 54. Christopher Cooper and Laura Meckler, “Obama Takes in a Record $150 Million, but McCain Narrows Gap in Some Polls,” Wall Street Journal, October 20, 2008, p. A1. 55. Wisconsin Advertising Project, “Pres. TV Advertising Spending Continues to Grow; Over $28 Million Spent from September 28–October 4,” press release, October 8, 2008 (wiscadproject.wisc.edu/wiscads_release_100808.pdf [January 2010]). 56. Ibid. 57. Alec MacGillis and Sarah Cohen, “Final Fundraising Tally for Obama Exceeded $750 Million,” Washington Post, December 6, 2008, p. A5. 58. Ibid. 59. Kenneth Goldstein, quoted ibid. 60. Lizza, “Battle Plans”; Kristin Jensen and Julianna Goldman, “Obama’s Primetime Ad Demonstrates Money Advantage over McCain,” Bloomberg News, October 30, 2008 (www.bloomberg.com/apps/news?pid=20601070&sid=ahtHBQt8EAg4 [January 2010]). 61. Kate Kaye, “Google Grabbed Most of Obama’s $16 Million in 2008,” ClickZ, January 6, 2009 (www.clickz.com/3632263 [January 2010]). 62. Ibid. 63. Ibid.; Steve Gorman, “Obama Buys First Video Game Campaign Ads,” Reuters, October 16, 2008 (www.reuters.com/article/vcCandidateFeed2/idUS TRE49F1PY20081016?pageNumber=1&virtualBrandChannel=10112 [January 2010]). 64. Gorman, “Obama Buys First Video Game Campaign Ads.” 65. Ibid. In-game ads were targeted to online players in Ohio, Iowa, Indiana, Montana, Wisconsin, North Carolina, Nevada, New Mexico, Florida, and Colorado. 66. James Margolis, senior adviser, Obama campaign, in “Advertising,” in Electing the President, 2008, edited by Jamieson, pp. 108–34, 122. 67. Ibid., p. 123. 68. See the comments of Bill McInturff and Joel Benenson in “The General Election,” in Campaign for President, edited by Harvard University, Institute of Politics, pp. 161–216, 186–87. 69. Plouffe, in “The General Election,” p. 185. 70. Cooper and Meckler, “Obama Takes in a Record $150 Million.” 71. Ibid. 72. See the comments of Sarah Simmons and Fred Davis in “The General Election,” in Campaign for President, edited by Harvard University, Institute of Politics, pp. 161–216, 184.

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73. A transcript of the ad can be found in “Advertising,” in Electing the President, 2008, edited by Jamieson, pp. 115–16. 74. This advertisement is available at Living Room Candidate, “Presidential Campaign Commercials, 1952–2008” (www.livingroomcandidate.org/news/ perma/hybrid-mccainrnc-ad-hits-obama-and-congress-on-pork-barrel-spending). 75. This advertisement is available at Annenberg Public Policy Center, “Spread the Tax Hooey!” FactCheck, October 26, 2008 (www.factcheck.org/elections2008/spread_the_tax_hooey.html [November 2010]). 76. Steve Schmidt, quoted in Annenberg Public Policy Center, “Behind the Scenes: Campaign ’08 Strategists Talk Candidly,” On the Record 2, no. 2 (May 2009), p. 7. 77. Michael Cooper and Megan Thee, “Poll Says McCain Is Hurting His Bid by Using Attacks,” New York Times, October 15, 2008, p. A1. See also Alexander Mooney, “Most Believe McCain’s Attacks on Obama Unfair, Poll Finds,” Politics, CNN, October 11, 2008 (www.cnn.com/2008/POLITICS/10/20/poll.crisis/ index.html [January 2010]). 78. Bill McInturff, in Campaign for President, edited by Harvard University, Institute of Politics, p. 187.

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Financing the 2008 Congressional Elections paul s. herrnson and stephanie perry curtis

T

he 2008 congressional elections occurred in the shadow of a hotly contested presidential race. Presidential elections always dominate the headlines, but with no incumbent up for reelection and the prospect of the election of the first African American president, the race between Senators Barack Obama and John McCain received exceptional media coverage. Despite the attention to the top of the ticket, the congressional elections offered their own fair share of drama. Having lost control of both the House and Senate two years earlier, Republicans hoped, albeit cautiously, that they could make significant inroads into the Democrats’ congressional majorities.1 Democrats, on the other hand, believed they could expand those majorities and perhaps even win enough seats to prevent Republican filibusters in the Senate.2 Candidates, political parties, and interest groups geared up for the election in the usual ways, including raising and preparing to spend large sums of money. The financing of the 2008 congressional elections can only be fully understood by examining the setting in which campaign contributors and fundraisers operated. The political setting provided opportunities to candidates of both parties, but the most prominent issues on the political agenda—the economy and the war in Iraq—advantaged the Democrats. This setting had an important influence on the contributions and expenditures of political parties, political action committees (PACs), and individuals. It also had an impact on the abilities of different types of candidates to raise funds.

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The Strategic Context The setting for the 2008 elections posed several fundraising and spending challenges for participants in the congressional races. Perhaps the most daunting tasks for the candidates involved a financial and issue environment in which they were eclipsed by the presidential campaigns. Most donors focused on the presidential nomination and general election contests, and, as is usually the case, individual House and Senate races received less of their attention and money. In the 2008 elections, presidential candidates raised a record-setting $1.8 billion compared with congressional candidates, who set their own fundraising record of $1.4 billion.3 Congressional candidates, political parties, PACs, and other interest groups had to compete with the presidential candidates’ campaigns in the money chase. In this competition among friends for campaign dollars, most Democratic candidates for public office, Democratic party organizations, and Democratic-allied PACs looked to the same donor pools as the Obama campaign. This problem was exacerbated in 2008 by the protracted nomination contest between Obama and Hillary Clinton and by Obama’s decision to forgo public financing in the general election, which amplified the focus on the presidential race. Similarly, Republican candidates, party committees, and allied PACs went trawling for dollars in some of the same financial reservoirs as the McCain campaign had explored. Pressured by congressional incumbents, who often view fundraising as critical to both their political survival and their career advancement, and encouraged by the possibility of realizing some of their own political objectives, many donors participated in financing the House and Senate elections of 2008 despite competition from the presidential campaign. Decisions made by those who participate in the financing of congressional elections are shaped by several factors. Issues and other political dynamics influence who decides to run for Congress and the flow of money to the candidates who enter the political fray. Chief among these is incumbency.4 The advantages of incumbency help members of Congress enjoy high reelection rates. Most senators easily reclaim their party’s nomination and go on to win the general election. House members have been even more successful in holding on to their seats. Reelection rates for members of the lower chamber have exceeded 90 percent for decades. Good constituent relations, accurate representation of constituents’ policy preferences, skillful use of the perks of office, superior fundraising,

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and relatively weak opposition are among the major explanations for the high reelection rates in the Senate and the House.5 Redistricting also has been important in stifling competition for many House seats, as most House members have sufficient influence to ensure that districts will be redrawn in such a way as to protect their careers.6 Incumbency helps produce a concentration of competition in congressional elections, which has significant implications for candidates and those who finance their campaigns. Amassing the resources needed to mount a competitive campaign is rarely a problem for congressional incumbents or most candidates contesting open seats. Challengers, however, are another story. Few House challengers succeed in raising the funds needed to wage a competitive bid for office. Many Senate challengers are similarly underfunded.7 The national political agenda also helps inform donor, candidate, party, and interest group strategies and influences election results. As was the case in 2006, the political environment in 2008 strongly favored the Democrats. George W. Bush’s presidency severely tarnished the Republican Party’s image. The president’s mishandling of Hurricane Katrina, growing public disapproval of the war in Iraq, and an overall sense among voters that the nation was on the wrong track created a political environment that was unfavorable to the GOP.8 This discouraged some well-qualified Republicans from running for Congress and depressed contributions from individuals and groups that traditionally support Republican candidates. Without good candidates, it is difficult for a party to raise money. Reports that the treasurer of the National Republican Congressional Committee had embezzled funds from both that committee and the National Republican Senatorial Committee, as well as from several GOP candidates and allied PACs, may have further discouraged GOP contributors.9 The same forces that made it difficult for the GOP to collect funds helped stimulate Democratic Party fundraising, providing the party and its congressional candidates with significant advantages over their GOP counterparts. The economic meltdown in September 2008 further added to the Democrats’ advantage over the Republicans, as many voters watched their housing values plummet, their jobs disappear, and their retirement accounts shrivel. The Democrats capitalized on the political environment by recruiting a strong crop of candidates, raising record funds, waging strong campaigns, and tailoring their message around issues that reflected favorably on their party and negatively on the Republicans.

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Heading into the 2008 elections the Democrats controlled 236 House seats and the Republicans 199. House Democrats needed to defend 7 open seats, the GOP 19. Most pundits and political insiders predicted the Democrats would maintain their control of the lower chamber and pick up some seats.10 The picture for the Senate was somewhat more complex. At the time of the election, each party controlled 49 seats, but the fact that two independents—Senators Joe Lieberman of Connecticut and Bernard Sanders of Vermont—caucused with the Democrats gave the party procedural control over the upper chamber. Republicans controlled 23 of 35 seats to be contested, including 5 seats that became open owing to retirements.11 This state of affairs strongly dictated that the GOP would have to focus more on defending their turf from Democratic incursions than on trying to expand it. Most commentators believed the Democrats would enlarge their majority, and a few speculated that the Senate Democratic Caucus might reach 60, the number needed to quash a Republican filibuster.12 The partisan breakdown of Congress and the combination of seats up for election were important elements of the context within which campaign contribution and spending decisions were made. Elected officials and parties that control the levers of power have advantages in influencing the flow of money in elections. Presidents, vice presidents, and cabinet officials often assist their party’s congressional candidates with fundraising and raise money for their party’s national, congressional, and senatorial campaign committees. President Bush, perhaps in reaction to his low standing in the polls, made little effort on behalf of GOP candidates in 2008.13 However, congressional leaders of both parties made significant efforts to help aspirants for the House and Senate raise money. Democratic candidates for the House and Senate, especially incumbents, benefited from their party’s control of Congress before the election and from the high likelihood they would control it afterward.

Campaign Contributors Individual and institutional motivations to donate money are of major consequence to congressional campaigns. Political parties, interest groups, and individuals contribute and spend money in elections for a variety of reasons. Democratic and Republican party committees seek to influence election outcomes and increase the number of offices they control. Many PACs and individuals also seek to help their preferred party

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maximize its political clout. Some also contribute out of a desire to elect members of Congress who share their views on critical issues or because they wish to gain access to influential members of Congress in order to influence the policymaking process. Some individuals give because they enjoy socializing with politicians and participating with other individuals in the political process.14 Of course, some candidates contribute to their own campaigns for the obvious reason that they want to win or at least have a decent showing at the polls. Whatever their motives, many individuals and groups felt compelled to contribute during the 2008 elections, donating approximately $1.4 billion to candidates for the House and Senate compared with $1.2 billion in 2004 and $1.0 billion in 2000.

Political Parties The current polarization of voters and politicians notwithstanding, American political parties act more pragmatically than ideologically.15 First and foremost, party leaders want to win control of political institutions. This goal strongly outweighs considerations of restructuring society in accordance with some grand vision or pressing a divisive issue, such as either side of the abortion rights debate.16 Even as party constituencies have become more ideologically cohesive locally and nationally, parochial interests tend to dominate congressional candidates’ strategies and tactics.17 Because both national parties seek to win as many House and Senate seats as possible, they become heavily involved in the financing of competitive elections in which their efforts have the potential to make the difference between victory and defeat, and they virtually ignore contests whose outcome seems a forgone conclusion. The Democratic Congressional Campaign Committee and the National Republican Congressional Committee play the lead role in devising the parties’ national strategies in House elections. They seek to identify the most competitive seats in the House, recruit strong candidates to run in them, and channel essential campaign resources to those candidates. This, in turn, makes their campaigns more competitive. The two committees advise House candidates on campaign strategy and assist in hiring campaign consultants, raising money, conducting issue and opposition research, and encouraging contributions from PACs and individuals. The congressional campaign committees are particularly helpful in assisting with fundraising for freshman lawmakers, incumbents in jeopardy of losing their seats, and nonincumbents in competitive elections. In recent years, they have played a critical role in redistributing the wealth from

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party leaders and other safe incumbents to candidates involved in races that are too close to call. The redistribution of wealth requires that incumbents look beyond their own narrow interests in favor of considering the collective interests of their party. Given that control over Congress has become competitive in recent years, party leaders have had an easier time explaining to their colleagues that the advancement of their individual goals has become closely intertwined with their party’s ability to win or maintain a congressional majority. The Democratic Senatorial Campaign Committee and the National Republican Senatorial Committee perform similar roles in Senate elections. The Democratic National Committee (DNC) and the Republican National Committee (RNC) are typically less involved in congressional elections, but their voter registration and mobilization efforts can influence the outcomes of these contests.18 Under the 2002 Bipartisan Campaign Reform Act (BCRA), the national, congressional, and state party committees can each contribute $5,000 to a House candidate in the general election; the parties’ national and senatorial campaign committees can contribute a combined total of $35,000 (indexed to inflation and amounting to $39,900 in 2008) in direct contributions to a Senate candidate; and state party committees can contribute an additional $5,000 to candidates for the House and the Senate.19 Parties also provide additional assistance to candidates through coordinated expenditures. These transactions, which offer both parties and candidates the opportunity for input, usually pay for public opinion polls, television and radio ads, issue and opposition research, fundraising, and other campaign activities. The limits for national party coordinated expenditures are indexed for inflation. In 2008 national parties could make a total of $40,900 in coordinated expenditures in House elections and between $81,800 and $1.39 million in Senate elections, depending on the size of the state’s voting-age population.20 State party committees are authorized to spend the same amounts in coordinated expenditures in House and Senate elections as the parties’ national organizations. Party organizations also can make unlimited independent expenditures to expressly advocate the election of their candidates or the defeat of those candidates’ opponents. These expenditures must be made without the knowledge or consent of the candidate, the candidate’s campaign organization, or any other group working in cooperation or coordination with a candidate, including some other part of the party. In the 2008 congressional elections the national parties vigorously pursued funds to sustain these various activities. The Democrats benefited

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from their procedural control over both chambers of Congress and a national mood that decidedly favored their party, and the Republicans enjoyed some fundraising advantages from having a party member occupying the White House. The Republicans have traditionally enjoyed a fundraising advantage over the Democrats because of their ability to tap into a deeper pool of wealthy and upper-middle-class donors and their superior direct-mail fundraising operation.21 However, in recent years the Democrats have begun to close the gap. The DNC, the Democratic Congressional Campaign Committee, and the Democratic Senatorial Campaign Committee all improved their direct-mail donor bases and introduced other fundraising innovations. Their Internet-based fundraising programs were especially effective. As a result of the Democrats’ advancements, along with a political environment that was hostile to the GOP, the National Republican Congressional Committee, the National Republican Senatorial Committee, and Republican state and local committees lagged behind their Democratic counterparts in fundraising. The net result was that Democratic Party organizations were fairly flush with funds. The DNC raised $260.1 million in the 2008 election cycle, the Democratic Congressional Campaign Committee took in $176.2 million, and the Democratic Senatorial Campaign Committee amassed $162.8 million (see figure 5-1). Democratic state and local committees raised $287.4 million in federally regulated funds (including funds transferred from the national committees). All of these organizations experienced significant fundraising gains over 2006. With the exception of the DNC, they also raised more money than they had in 2004. However, comparisons between the DNC’s fundraising in 2008 and 2004 must take into account the fundraising of the Democratic presidential nominee. While John Kerry, the Democrats’ nominee in 2004, accepted public financing for the general election (thus ending his own campaign fundraising) and then encouraged donations to the DNC, Obama declined public funds and continued his personal fundraising up until Election Day in 2008, making the DNC’s fundraising total almost certainly smaller than it might have been (see chapters 1 and 6). The Republicans did not fare so well. Particularly hard hit was the National Republican Congressional Committee. Its $118.3 million in receipts in 2008 was less than amounts it had collected in any election cycle since 2000. The National Republican Senatorial Committee raised $94.4 million in the 2008 election cycle, and Republican state and local committees raised $222.3 million. Although the RNC raised $427.6 mil-

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Figure 5-1. Party Receipts, 2008 Congressional Elections a Millions of dollars Democrats Republicans

400

300

200

100

National committee

Congressional campaign committee

Senatorial campaign committee

State and local committees

Source: Federal Election Commission data (www.fec.gov/press/press2009/05282009Party/20090528Party.shtml) a. Includes only funds in parties’ federal accounts and excludes funds transferred among party committees.

lion in the 2008 election cycle, its apparent fundraising advantage over the DNC is somewhat misleading because it is largely the result of the decisions both parties’ presidential nominees made with regard to accepting public funds for the general election. Obama’s decision to forgo public funds resulted in his attracting many contributions that otherwise would have been collected by the DNC. McCain’s decision to accept public funds, on the other hand, meant that his campaign and the RNC were not competing for contributions from the same donors. Indeed, the McCain campaign and the Republican Party spent less money than their Democratic opponents on the 2008 presidential election (see chapter 4). Because of the Republican campaign committees’ financial disadvantages, the RNC stepped in to offer assistance in a small group of key congressional races in the battle for Capitol Hill. The RNC spent $2.2 million in coordination with twenty-six House candidates; contributions ranged from roughly $168,000 in support of Cynthia Lummis in Wyoming to $37,687 in support of Charles “Greg” Davis in Mississippi. The RNC spent more than $3.2 million in coordinated expenditures for seven Senate candidates,

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Figure 5-2. Party Contributions, Coordinated Expenditures, and Independent Expenditures, 2008 Congressional Elections Millions of dollars Contributions

80

Coordinated expenditures

70

Independent expenditures

60 50 40 30 20 10 Democrats

Republicans House

Democrats

Republicans Senate

Source: Bob Biersack, FEC deputy press officer, e-mail communication with Stephanie Curtis, May 26, 2009.

ranging from $1 million for Saxby Chambliss in Georgia to $171,000 for John Sununu in New Hampshire. The relatively low ceilings for party contributions and coordinated expenditures, combined with BCRA’s prohibitions against issue advocacy ads financed by party soft money, encouraged the parties to increase their independent expenditures after 2002. For the most part, the totals for party independent expenditures in House and Senate elections increased with each election cycle since passage of BCRA. However, this was not the case in 2008, when Republican independent expenditures in House races totaled $32 million (see figure 5-2) compared with more than $83 million in 2006. Because campaign finance law prohibits parties from coordinating or communicating their independent spending strategies with the candidates, the candidates’ campaign organizations, or others working with the candidates—including party committees that advise or contribute to candidates—planning these expenditures requires substantial organizational investment. The parties had to form special, segregated groups for the purpose of directing this spending. These groups had to

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hire their own teams of staff and consultants, purchase their own polls and other research, and create and disseminate their own TV, radio, and other advertisements. These requirements increased the actual costs of making independent expenditures considerably over those associated with routine contributions and coordinated expenditures. Independent expenditures also come with some risk: the advertisements disseminated may be inconsistent with the message being communicated by the candidate the party is trying to help and might alienate that candidate’s supporters, mobilize the opponent’s supporters, or put the candidate at some other disadvantage. Nevertheless, in 2008 party strategists used independent expenditures extensively to communicate directly with voters in states or districts where they thought such expenditures could influence the outcome of a race. Given the high value associated with each seat gained or lost in the House and Senate in the 2008 elections, party officials were willing to incur the additional financial costs and political risks associated with independent expenditures. The same national political environment that enabled the Democrats to aggressively raise money in 2008 also enabled them to aggressively pursue Republican-held seats in Congress. However, given the party’s electoral successes in the previous election and the limited number of seats that appeared to be competitive early in the election cycle, the Democrats and their interest group allies sought to broaden the field of competition by repeating a strategy that had proven successful in helping them retake control of Congress in 2006. The House Democrats’ Red to Blue Program, and a similar approach used by Democrats in the Senate, involved recruiting strong Democratic challengers and open-seat candidates to run for Republican seats and funneling money to these candidates through events, website postings, and other fundraising techniques.22 In 2006 the Red to Blue Program helped fifty-six candidates raise $22.6 million, and twentyseven of these candidates were victorious. Two years later it helped sixtythree candidates raise in excess of $23 million, and twenty-seven of these were victorious as well.23 The result was that over the course of the 2006 and 2008 cycles, the Democrats were able to increase the number of competitive House and Senate elections located in what had traditionally been considered Republican bailiwicks and to win a substantial number of these contests.24 The expansion in the number of competitive seats that occurred during these two election cycles represents a reversal of what had been a wellestablished pattern of competition. In congressional elections before

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2006, the political parties, various interest groups, and pundits identified a large number of potentially competitive seats early in the election cycle; as the election season unfolded, they revised their assessments to include substantially fewer competitive races.25 Democratic Party and allied interest group strategies in 2006 bucked this trend, contributing to an expansion of the field of competition and to the election of more Democrats to Congress. The parties targeted their contributions and coordinated expenditures strategically in the 2008 House races, spending most of these funds in competitive contests (see table 5-1).26 The Democrats distributed 78 percent of their contributions and coordinated expenditures to candidates in competitive races, distributing the remaining 22 percent to candidates in elections that ultimately proved to be one-sided. A greater portion of the Democrats’ funds probably would have been committed to the most competitive contests had the party not chosen to try to expand the field of competition to include more House races. The Republicans delivered 88 percent of their funds to help GOP candidates in competitive contests, leaving only 12 percent for candidates in uncompetitive races in 2008. These figures are similar to those in previous elections, as political parties routinely deliver the vast majority of their funds to candidates in the most spirited contests. Candidate status also had a big impact on the distribution of party money. Among Democrats, challengers were the primary recipients of their party’s largesse, benefiting from 46 percent of the party’s House contributions and coordinated expenditures. Incumbents came next, attracting 30 percent. Candidates for open seats received only 24 percent of Democratic party spending. This distribution is fairly consistent with the aggressive allocation strategies parties employ when their leaders sense an opportunity to increase the number of congressional seats under their control.27 Not surprisingly, the breakdown for Republican funds is substantially different. Reflecting a perceived need to defend its sitting House members, the GOP committed 42 percent of its House campaign contributions and coordinated expenditures to assist incumbents and allocated only 34 percent to help challengers, leaving 24 percent for candidates running for open seats. This is consistent with the allocation strategies a party uses when the political environment does not favor it. It is noteworthy that regardless of whether the strategic context forces a party to take an aggressive or a defensive posture, both parties typically commit between one-fifth and one-third of their contributions and coordinated

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Table 5-1. Party Contributions and Coordinated Expenditures, 2008 Congressional Electionsa Percent, except as indicated House

Senate

Democrats

Republicans

Competitive Incumbents Challengers Open seats

24 (35) 35 (68) 19 (24)

36 (68) 30 (35) 22 (24)

Uncompetitive Incumbents Challengers Open seats

6 (152) 11 (90) 5 (10)

Total (dollars)

5,050,616

7,270,092

6,869,706

6,650,250

(379)

(379)

(34)

(34)

N

6 (90) 4 (152) 2 (10)

Democrats 14 (2) 66 (11) 7 (2) 3 (9) 6 (7) 4 (3)

Republicans 80 (11) 8 (2) 6 (2) 3 (7) < 0.5 (9) 3 (3)

Source: Compiled from Federal Election Commission data. a. Figures are percentages of money distributed to influence campaigns of major-party candidates in two-party contested general elections, excluding two-incumbent contests. N’s are in parentheses. Incumbents in competitive races are defined as those who lost or who won by 20 percent or less of the two-party vote. Incumbents in uncompetitive races are incumbents who won by more than 20 percent of the two-party vote. Challengers in competitive races are those who won or who lost by 20 percent or less of the two-party vote. Challengers in uncompetitive races are those who lost by more than 20 percent of the two-party vote. Open-seat candidates in competitive races are those whose election was decided by 20 percent or less of the two-party vote. Open-seat candidates in uncompetitive races are those whose election was decided by more than 20 percent of the two-party vote.

expenditures in House races to open-seat candidates.28 These are large allocations, given the relatively small number of seats that are open in a given election cycle. They underscore the perceptions of leaders in both parties that trying to defeat an incumbent is typically a steep uphill battle and that open-seat races present the best opportunities for expanding their numbers in Congress. Democratic party committees spent roughly $81.6 million on independent expenditures in sixty-four competitive and seven uncompetitive two-party contested House races in 2008. When combined with the party’s contributions and coordinated expenditures in these races, these outlays bring the Democratic Party’s spending on behalf of these House candidates to $86.6 million. Independent expenditures by the Republican Party in two-party contested House races in 2008 totaled $29.4 million, bringing the Republicans’ total spending in two-party contested House races to $36.6 million. For both parties, most of the independent expenditures were made in the last few weeks leading up to the election, making

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it easier to target them to close races than party contributions and coordinated expenditures, which were made throughout the election season. Overall patterns in the distribution of party spending provide useful information about party strategy. Additional insights can be gained by examining party expenditures in specific elections. For example, perhaps the major beneficiary of party spending was Democratic incumbent Travis Childers (D-MS), who successfully defended his seat during the 2008 general election. Childers was first elected to the House in a 2008 special election after Representative Roger Wicker (R-MS) was appointed to the Senate seat vacated by Trent Lott. After defeating Davis in that contest, Childers faced him again in the general election. Both parties invested large sums in the contest. The Democrats committed almost $3.1 million, including $15,000 in contributions, another $172,000 in coordinated expenditures, more than $1.1 million in independent expenditures promoting Childers, and almost $1.8 million more in independent expenditures attacking Davis. Although the Republican Party was outspent almost two-to-one in the race, it also invested significant funds. Its more than $1.4 million commitment included nearly $70,000 in contributions, $79,000 in coordinated expenditures, $27,000 in independent expenditures promoting Davis, and another $1 million in independent expenditures opposing Childers. As illustrated by the Childers-Davis contest, party organizations invest huge sums in a limited number of individual races. Moreover, because of BCRA’s ceilings on contributions and coordinated expenditures, most party expenditures are made independently of a candidate’s campaign. Thus if a candidate and his or her party follows the letter of the law, the candidate will be totally unaware of the party’s campaign activities until after they have taken place. In the case of the Childers-Davis election, Childers had little if any advance knowledge of the nature or timing of almost 94 percent of the campaign advertisements the Democrats disseminated to help him win; ostensibly, Davis was similarly in the dark about nearly 90 percent of the GOP’s advertisements.29 Party activity in Senate elections is strongly influenced by the specific seats up for election in a given cycle, as well as the conditions associated with the broader political context. As a result, the pattern for the distribution of party funds in elections for the upper chamber in 2008 bears many similarities to the pattern described for the lower chamber. First, both parties spent virtually all of their funds in competitive races. Second, Democratic leaders, sensing that there were many potential opportunities

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to defeat GOP incumbents, committed 72 percent of their party’s resources to assist challengers, including 6 percent to those in races that ultimately turned out to be lopsided contests, and designated only 17 percent to incumbent protection. Third, Republican leaders’ assessments of the situation compelled them to invest the vast majority of the GOP’s contributions and coordinated expenditures on incumbents. Party spending followed different patterns in the two chambers in two important ways. Both parties committed more money to incumbent-challenger races for the Senate than for the House, and both parties committed more funds to competitive contests in the Senate than in the House. These two differences can be attributed to the nature of the specific Senate seats up for election in 2008: only thirty-four pitted major-party candidates against each other. This made it easier for party leaders to target their spending in Senate, rather than House, elections. Both parties made substantial independent expenditures in two-partycontested Senate elections. The Democrats spent roughly $85.5 million in this manner. When independent expenditures are combined with contributions and coordinated expenditures, total spending by the Democratic Party in two-party-contested Senate races reached $92.4 million. The Republicans spent $38 million on independent expenditures, resulting in total spending for two-party-contested Senate races reaching $44.7 million. As in the 2008 House races, most of the independent expenditures were made in competitive contests during the last few weeks of the election season. Several Senate elections were marked by substantial party spending. One of them was the Wicker-Musgrove contest in Mississippi. The Republicans spent more than $4.8 million to help Wicker, the incumbent, hold on to the Senate seat he was appointed to fill in December 2007. Almost 92 percent of these funds took the form of independent expenditures attacking his opponent, former Mississippi governor Ronnie Musgrove. The Democrats allocated almost $16.4 million to help Musgrove, and 95 percent of those funds were used to run attack ads against Wicker. In the end, the prodigious negative campaign the Democratic Party mounted against Wicker was insufficient to defeat the incumbent.30 Of course, cash contributions and independent expenditures of formal party organizations do not constitute the full range of party efforts. Party organizations provide promising candidates with assistance in campaign management, fundraising, research, communications, and a host of other specialized election activities. In addition, party-connected committees

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Table 5-2. Party-Connected Contributions, 2008 Congressional Electionsa Dollars House

Senate

Democrats

Republicans

Democrats

Republicans

Leadership PAC contributions 13,360,686 Candidate contributions 8,553,922 Contributions from retirees and members not up for reelection 220,879 Contributions from nonfederalpolitician-sponsored PACs 108,019

12,264,594 6,423,556

5,559,810 377,995

7,088,052 219,189

323,911

370,021

411,756

178,703

154,970

78,706

Total

19,190,764

6,462,796

7,797,703

22,243,506

Source: Compiled from Federal Election Commission and Center for Responsive Politics data. a. Figures are for contributions from leadership PACs, congressional candidates, retired members, members of Congress not up for reelection in 2008, and PACs sponsored by nonfederal politicians to candidates in all congressional elections, including those in primaries, runoffs, and uncontested races.

made up of politicians’ personal campaign committees (retired members of Congress or those not up for reelection in 2008) and leadership PACs (including PACs sponsored by nonfederal politicians) collected almost $56 million, which they redistributed to candidates in the 2008 House and Senate elections (see table 5-2).31 Most of these party-connected funds are contributed by leadership PACs and a significant amount to the personal campaign accounts of current candidates. The leading donor for the Democrats in 2008 was Majority Leader Steny Hoyer (D-MD), who contributed almost $1.6 million from his leadership PAC (AmeriPAC) and his personal campaign account; the leading donor for the Republicans was Minority Whip Eric Cantor (R-VA), who contributed more than $1.1 million from his leadership PAC (Every Republican Is Crucial PAC) and his personal campaign account.32 The $56 million total in party-connected contributions made in 2008 represents a slight increase from the $54 million that was redistributed to candidates in 2006, but this increase masks a significant underlying shift in favor of Democrats. In 2008 current and former Democratic House members and Democratic leadership PACs redistributed $22.2 million to selected House candidates, an increase of almost $8.1 million over 2006. The Republicans’ $19.2 million in party-connected contributions in 2008 represent a decrease of almost $6.4 million from 2006 levels. The figures for the

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Senate, which demonstrate a slight GOP advantage in party-connected contributions, also are part of trend toward a narrowing of the Republicans’ advantage in this area of funding. The decline in Republican candidate-tocandidate contributions, although not as profound as in the House, was largely the result of a decline in leadership PAC activity. Much of the decline can be attributed to the retirements of some major donors. The twenty-four Republicans who retired from the House, including Speaker Dennis Hastert and former National Republican Congressional Committee chair Tom Reynolds, contributed a combined total of only $1.3 million in 2008, as opposed to the $6.1 million they contributed in 2006.33 In both parties there are differences and similarities between the distribution of party-connected contributions and the distribution of funds made by party organizations to candidates for the House and Senate in 2008. The major similarity is that candidates involved in competitive elections received more funds of both types than candidates in noncompetitive contests. The major difference is that more party-connected money than party organization money flowed to incumbents, including incumbents in uncompetitive races, than to challengers. The differences in the distributions of these two types of funds can be attributed to the differing perspectives of the individuals who allocate them. Party leaders are authorized to use party resources to pursue their party’s collective goals, which in elections concern maximizing the number of seats under the party’s control. Party members who contribute to other candidates are concerned with advancing both the party’s collective goals and their own private interests. These interests include running for higher office, winning a congressional leadership race, claiming a valued committee assignment, and swaying the legislative votes of congressional colleagues.34 Party members pursue their party’s collective goals by following their party’s lead in contributing to candidates in competitive elections. They pursue private interests by contributing to the politicians most likely to be in a position to help them, primarily incumbents, most of whom have a high probability of reelection.35 Among the candidates who raised large sums of money in the form of party-connected contributions in 2008 were the Democratic House incumbent Childers of Mississippi and the Republican Senate incumbent Chambliss of Georgia, who was forced into a runoff election against former lieutenant governor Democrat Jim Martin. Childers received $398,235 from his colleagues in the House, and Chambliss collected $537,300 from

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colleagues in the Senate. Party-connected contributions increased Childers’s party-related funds (party contributions, coordinated expenditures, and independent expenditures) by roughly 13 percent and Chambliss’s by 12 percent. Childers’s opponent, Davis, collected $189,163 from House Republicans, and Chambliss’s opponent, Martin, raised $234,161 from Senate Democrats. These funds boosted their party-related funds more than 13 and 2 percent, respectively. The Republican Senate incumbent Wicker of Mississippi also received help in the form of partyconnected contributions amounting to $261,000. His opponent, Musgrove, was given $196,000 in party-connected contributions by members of the Democratic Party. The distribution of party-connected contributions in these three elections reinforces three important points about the roles of parties in congressional elections. First, analyses that rely solely on expenditures made by formal party organizations underestimate the parties’ role in the financing of congressional elections. Second, party committees influence the contributions of individuals and other organizations, including those sponsored by members of Congress.36 Third, the proincumbent bias of party-connected contributions suggests that members of Congress contribute to other candidates to advance both their party’s collective goals and their individual goals. Party activity in congressional elections also includes substantial voter mobilization efforts. Parties make mass telephone calls, send targeted e-mails, carry out door-knocking campaigns, and undertake other efforts to register voters and turn them out to the polls. In presidential election years, most of this activity is carried out to influence the presidential election. Still, some funds are allocated specifically to mobilize voters in key House and Senate districts. State and local party committees spearhead most party voter mobilization efforts, but money from the parties’ national, congressional, and senatorial campaign committees has traditionally helped to fund those efforts. In past elections, the financial advantages of the RNC and the National Republican Congressional Committee enabled the GOP in close congressional races to finance voter mobilization efforts that were more extensive than those mounted by the Democrats. However, in 2008 the GOP’s fundraising difficulties deprived them of this advantage.37 Republican state and local parties were able to spend only $208 million on mobilization efforts compared with the $272 million spent by their Democratic counterparts.38

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The 2008 Colorado Senate contest between Democratic representative Mark Udall and Republican representative Robert Schaffer is exemplary of a race in which both major parties undertook impressive grassroots efforts. Most of the Democrats’ pro-Udall efforts were carried out under the guise of Forward Colorado. Funded with $2.6 million from the Democratic Senatorial Campaign Committee, Forward Colorado was the lead organization in the Democrats’ coordinated campaign to boost overall Democrat performance in Colorado. It had twelve statewide offices and approximately 100 employees. Forward Colorado worked closely with other Democratic organizations, including the Colorado Democratic State Central Committee, which earmarked $500,000 to Forward Colorado’s efforts to elect Udall, the Democratic congressional and senatorial campaign committees, and the DNC, which contributed $225,000, $2.6 million, and $3.5 million, respectively. Forward Colorado is similar to the Democratic Party’s national grassroots voter registration effort, Register for Change, which stimulated overwhelming enthusiasm and voter turnout during the primaries and general election. These organizations sought to boost the number of Democratic Party registrants by raising and spending large sums of money, capitalizing on the popularity of the contestants for the Democratic presidential nomination, and making the most of its highly visible February 5 caucus. The DNC also aided Forward Colorado’s voter targeting and outreach efforts by providing a computerized voter file that was critical to identifying and mobilizing Democratic and Democratic-leaning voters. One measure of Forward Colorado’s success is that during the final four months of 2007, it registered 18,500 new Democratic voters and encouraged an additional 10,000 voters to switch their party affiliations from Republican to Democrat. A second measure of success involves early voting: along with the Obama campaign, Forward Colorado transformed a Republican edge in early voting in 2006 into a Democratic edge in 2008.39 The Republicans’ grassroots efforts in Colorado also were extensive. The RNC contributed just over $2.5 million to its state party’s coordinated campaign. The Colorado Victory Program spent approximately $10 million on voter targeting, outreach, and mobilization, including $4 million on direct mail that was sent primarily to independent voters. More than $2.5 million of these funds was provided by the RNC. With more than 20,000 volunteers, the Colorado Victory Program made more than 2.4 million voter contacts between June 1 and Election Day.40

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Interest Groups Interest groups were heavily involved in the 2008 elections, providing direct contributions to specific congressional candidates, disseminating advertisements both for and against candidates, and mobilizing voters. Political action committees contributed $408.3 million to congressional candidates in the 2008 elections, up nearly 11 percent from the 2006 election cycle and nearly 33 percent from 2004. Senate candidates raised $100.1 million from PACs, an increase of 20 percent over the 2006 elections and 31 percent over 2004. House candidates, who raised $308.2 million from PACs, increased their take by almost 8 percent compared with 2006 and by 33 percent over 2004. The Democratic takeover of the House and Senate had a major impact on the flow of PAC money in both chambers. Democratic candidates collected $233.9 million during the 2008 elections, an increase of almost 45 percent, while Republican candidates raised $178.9 million, a decrease of almost 14 percent. This result amply supports the generalization that when it comes to making campaign contributions, most interest groups are drawn to power. In addition to direct contributions, PACs made $21.7 million in independent expenditures in House races compared with $26.3 million in 2006 and $14.6 million in Senate contests in 2008 compared with $11.2 million in 2006.41 Political action committees and their activity are not equally distributed across all sectors of the economy or society. Business interests—such as corporations, corporations without stock, cooperatives, and trade, membership, and health associations—sponsored 57 percent of all PACs in 2008. Labor PACs accounted for less than 6 percent of the PAC community. Nonconnected PACs, including ideological PACs and PACs associated with federal candidates, made up the remaining 37 percent (see figure 5-3). Not surprisingly, business-affiliated groups accounted for the vast majority of PAC spending in the 2008 congressional contests. Corporate PACs made about $141.7 million in contributions and $150,000 in independent expenditures during the 2008 House and Senate elections (approximately 34 percent of all PAC spending). They were followed by trade, membership, and health PACs, which made $105.7 million in contributions and another $23.9 million in independent expenditures (about 31 percent). The spending of labor PACs and nonconnected PACs came next (each with roughly 16 percent of total PAC spending), followed by PACs sponsored by cooperatives and corporations without stock. The concentration of PAC spending is not limited to business-related PACs. A

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Figure 5-3. PAC Contributions and Independent Expenditures, 2008 Congressional Elections Millions of dollars Independent expenditures 140

Contributions

120 100 80 60 40 20

Corporate

Trade, membership, and health

Labor

Nonconnected Cooperative Corporation without stock

Source: Federal Election Commission, “Growth in PAC Financial Activity Slows,” press release, April 24, 2009 (www. fec.gov/press/press2009/20090415PAC/20090424PAC.shtml [July 13, 2009]), and Bob Biersack, FEC deputy press officer, e-mail communication with Stephanie Curtis, May 8, 2009.

relatively small group of PACs typically accounts for most PAC spending in congressional races. During the 2008 election cycle, just over 16 percent of all PACs made more than 84 percent of all contributions to congressional candidates. Political action committees use what are generally referred to as ideological, access-oriented, or mixed strategies when spending money in House and Senate elections.42 Ideological or single-issue PACs are similar to political parties in that their primary goal is to influence the political process through elections. Most of these PACs are classified by the Federal Election Commission as nonconnected PACs because they have no sponsoring organization. These PACs generally contribute to maximize the number of House members in office who share their policy views, often on such salient issues as abortion rights, business regulation, and the environment. These PACs distribute most of their resources to candidates in competitive contests but occasionally make contributions to encourage the careers of promising politicians. Some of their contributions go into the

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coffers of congressional leaders, who later redistribute the funds to incumbents and other candidates in close races. Nonconnected PACs contributed more than $62 million to congressional candidates during the 2008 election cycle, nearly $33 million of which went to Democratic candidates and $29 million to Republicans. They were responsible for an additional $3.9 million in independent expenditures in congressional elections, 47 percent of which was spent to help Democrats. Rarely interested in gaining access to legislators, nonconnected PACs concentrate on advancing issues linked to fundamental values that officeholders are seldom willing to compromise on. Planned Parenthood and National Right to Life are two prominent examples of this type of PAC. Access-oriented PACs view elections pragmatically. Their main goal is to gain access to members of Congress who are in a position to influence regulations, appropriations, taxes, or treaties that affect the policy environment in which the PAC’s sponsor operates. These groups consider campaign contributions an important tool for reaffirming or strengthening their relationships with influential lawmakers. They recognize that contributions can arouse goodwill in representatives and senators, making it easier for the group’s lobbyists to influence the legislative process. Committees that follow access strategies are likely to contribute most of their money to incumbents, especially to members of the House and Senate who occupy party leadership posts, chair or are members of important committees or subcommittees, or are recognized leaders in specific policy areas. Because these PACs are interested in influencing congressional policy decisions more than election outcomes, they are not too concerned about the competitive aspect of elections. In fact, some recipients of PAC dollars do not even have opponents. Procedural control of Congress, which influences a legislator’s ability to get things done, does, however, have a substantial impact on the flow of money from accessoriented PACs. Thus the recent switch in control from the Democrats to the Republicans, and then back again to the Democrats, had a major impact on the flow of these funds.43 Corporations and other business PACs with dealings before Congress, such as AT&T and Microsoft, make up the largest share of this group. Political action committees in the last group, mostly labor unions, follow mixed strategies. They make some contributions to candidates who share their views and some to incumbents to whom they wish to maintain access. In the first case, most of the contributions go to candidates in close races, and in the second case to powerful incumbents. In elections

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where PAC decisionmakers are under cross-pressures because the incumbent is in a position to influence the group’s legislative priorities while the challenger is more supportive of the group’s interests, most PACs that follow mixed strategies contribute solely to the incumbent, but a few also contribute to the challenger. The International Brotherhood of Electrical Workers was the largest such group in 2008, donating $10,000 to Jeff Merkley in his successful campaign against Senator Gordon Smith in Oregon. However, the group donated $3,000 to Smith’s campaign as well. These contributions held true to form in the 2008 elections. Corporate and trade association PACs, which tend to share the antitaxation and antiregulation views of Republicans, gave roughly half of their respective House donations to GOP candidates (see table 5-3). Similarly, nonconnected PACs distributed about 45 percent of their House funds to Republicans. Labor union PACs gave 92 percent of their House funds to Democrats. The overall distribution of PAC money favored members of the House majority: Democrats received 59 percent of the total funding, and Republicans collected the remainder. As was the case following previous changes in party control of the House and Senate, many PACs began to favor the Democratic candidates following the Democratic takeover of Congress in 2006, but they did not wholly abandon the Republicans, nor did they abandon their previous contribution strategies. During the 2008 elections, corporate PACs continued to support House incumbents with the vast majority of their funds, of which 93 percent went to incumbents, 5 percent to open-seat candidates, and a mere 2 percent to challengers. Whether a race was close seemed of little concern, as 64 percent of PAC expenditures in House elections was made to help incumbents of both parties who won reelection with more than 20 percent of the two-party vote. Trade association PACs followed a similar pattern, except that they committed slightly more of their funds to challengers and open-seat candidates. These patterns are consistent with past election cycles. Labor PAC contributions to House candidates continued to reflect their inclination to follow mixed strategies. They allocated most of their money to Democrats because of shared ideological goals. However, 64 percent of their funds went to help Democratic House incumbents, who would be best positioned to influence legislation important to the labor movement. Indeed, incumbents in uncompetitive elections benefited from more labor dollars than any other group of Democratic candidates. Labor PACs even allocated 8 percent to Republican incumbents, though

1 1

< 0.5 1 94,883,503

Total (dollars)

47,460,077

2 < 0.5

2 < 0.5

46 4

9