How Campaign Finance Affects Electoral Outcomes

How Campaign Finance Affects Electoral Outcomes

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How Campaign Finance Affects Electoral Outcomes

I. Introduction

An electoral candidate can win an election if he has plenty of campaign finances.

This seems to be the common wisdom that people believe in when it comes to the electoral

success of candidates. However, such a statement is not easily verifiable. In fact, there are

several factors involved in the determination of whether or not there is a correlation between

the campaign finances used by candidates and the probability of winning due to these funds.

It has been the contention of majority that for a candidate to get a seat or win the

presidency, it is important that he spend lavishly. If this is the case, then incumbents, who are

generally the ones equipped with the biggest campaign funds, have edge over challengers. It

is also an assurance to potential challengers that if they manage to put up campaign funds,

whether from contributors or from their own pockets, they are already assured of a win in the

elections.

With the government structure the United States have, generalizing for all sectors of

the government, particularly during the electoral races, will be quite complex. Moreover,

though it is very easy to make assumptions, such arguments could start crumbling once

empirical studies of various experts on the subject of political science come to light. Factors

such as policy decisions, party affiliations, popularity, etc. play a role in the acquisition of

campaign finances, necessitating the need for thorough analysis of how these factors affect

the fund turn-out, thereby the election outcomes. That is, if the argument is true that huge

campaign finances can make winning candidates.

This research paper aims to give a clear presentation, backed by extensive data

gathering, analysis and assessment of how, if at all, campaign finances affects election

outcomes. In the intention of making the analysis of data more understandable, the focus will

be placed only on the presidential elections and the corresponding campaign funds of each

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How Campaign Finance Affects Electoral Outcomes

presidential candidate, as well as on the effects of the said funds on incumbents and

challengers for a seat in an election.

Furthermore, this paper will present as a roadmap starting in part II, a review of

literature from various political science stalwarts and how their views relate to the hypothesis.

Part III contains the presentation of the hypothesis and the arguments that surround it. The

research design will then be discussed in part IV, where the gathering of data will be detailed

as well as the discussion of each variable involved. This will be for a clearer understanding

on how the results are achieved. Then, in part V, the complex data analysis and assessment

will be the focus, with the results of the analysis to be included and thereby explaining

empirically, the correctness, or lack thereof, of the hypothesis. Last of all is part VI, the

conclusion. This will contain the final findings. This is where the correctness or inaccuracy

of the hypothesis will be stated in a matter-of-fact manner based on the data analysis.

II. Review of Literature

The effect of campaign finances is a perennial mind-boggling topic for many political

scientists. Despite being experts in this field, they differ in their beliefs and views. Disputes

on the real effect of campaign contributions and funds on the results of the elections have

always been existent. Morton and Cameron’s (1992) “early empirical evidence” states that

indeed, outcomes during elections are directly affected by the spending made challengers.

Additionally, they believe that the spending made by incumbents is unproductive. These

views are shared with Levitt (1995) and call it “conventional wisdom”.

However, many equally known political science experts disagree. However, the

disagreement is based on the difference in the effects of the campaign finances between

incumbents and challengers. Erikson and Palfrey (1998, 2000), for instance, do not believe

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How Campaign Finance Affects Electoral Outcomes

that the effect of the spending of the challenger is greater than that of the incumbent.

Whatever their views are, one thing is consistent, that these researchers believe that campaign

finances indeed have effects, in varying degrees, to candidates for election. However, the

question remains, are these effects strong enough to change the election outcomes?

Levitt believes that election spending, whether by incumbents or challengers, has

same or little impact on the results of the election.

For a more thorough understanding, a hypothesis will be formed, tried via data

analysis and tested for its accuracy or lack thereof.

III. Hypothesis: Campaign Finances Affect Election Outcomes

The view that campaign finances affect election outcomes has been the contention of

many politicians, political scientists, government officials and layman all over the world.

However, given the fact that government structures, economies and many other factors makes

the situation in each country differ from another, this hypothesis is limited only to the federal

government of the United States.

It is easy to think that campaign finances really have something to do with the success

of a candidate in an election. Common sense seem to dictate this since money can go a long

way when it comes to gaining popularity and being known to the voting public. Yet,

empirical and analytical evidences are necessary to prove or disprove such hypothesis for it to

become truly believable.

In the 1996 national elections alone, results seem to go against such claim. In the

diagram shown below as taken from the Federal Election Commission website, where the

amount of disbursements is in blue ink, it is clear that the money spent by presidential

candidates Dole and Forbes are even bigger that those disbursed by Clinton. Yet, it was

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How Campaign Finance Affects Electoral Outcomes

Clinton who won. Perot, who did not do much or any spending at all, placed third.

In the 2004 presidential elections, the results are reversed. George W. Bush, who

spent more, at a net amount of $351,759,170, than John F. Kerry who disbursed

$285,221,280 won the elections and became the 43rd President of the United States.

With many examples like these proliferating in the United States history, it is very

easy to understand why disputes over what to believe in with regards to this hypothesis

abound. It may surprise many people that such simple looking hypothesis may not be easily

verifiable. Actual electoral results over a long period of time in the history of America will

make the hypothesis even harder to prove.

To get a more definite answer to the truth in the hypothesis, there is no better way to

prove it than through the use of actual enough and quantifiable data that can be verified,

assessed, and tested. Results of such assessment will be a good basis of whether or not the

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How Campaign Finance Affects Electoral Outcomes

hypothesis is correct.

IV. Research Design

To be able to test the veracity of the hypothesis, two main variables are important, the

amount of campaign finances obtained and actually disbursed and the results of the elections,

i.e., if the subject candidate who made the disbursements won the elections.

Pursuant to the issue at hand, a multiple equation empirical model is to be used. This

model is tasked to give an estimate of the probability of the candidate winning in the election

as well as the contributions they receive for their campaign. The election result is assumed as

the function two candidates personal traits and the total campaign finances that each of them

has for spending. It is a given that those who give funds choose candidates who they think

will win. Additionally, those who are running seek more contributions if they find

themselves in a neck-to-neck race, thus, contributions should be taken as endogenous.

The figure above as taken from the work of Magee (2001) in published in The Policy

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How Campaign Finance Affects Electoral Outcomes

Journal, shows the endogenous nature of campaign finances, contributed by donors to

candidates, through plotting of average campaign contributions versus the margin of success

of the candidates in an election or open seat races, for incumbents and for challengers against

said incumbents. The chart will show that there is a decrease in the amount of campaign

finances received by open seat candidates and incumbents while their margin of victory

increases. In this figure, as based on actual situation, only one incumbent lost to a challenger.

This figure shows that despite the increase in campaign funds of those challengers

who became successful in the elections, it is still inconclusive if funds managed to influence

the results.

To make the results more conclusive, the real effects of the campaign finances on the

results of the elections were separated from the expected effects of these finances have on the

election outcomes with the use of a system of equations.

As mentioned in the first part of the paper, many factors are considered in the pursuit

of getting a general and unified answer to the hypothesis. Such factors are included in this

research design as variables. In the 1st stage of the model, factors like campaign finances that

the candidates received, classified under Democratic or Republican, expected vote by the

candidate as separated also according to party, if the candidate is a challenger or an

incumbent and other variables that are both explanatory and exogenous.

As can be deducted from the above model, estimates can be determined for the

challenger, incumbent or open seat candidate effects of receipts. Moreover, it shows the

estimates of the response of campaign finances received respond to the results expected.

Lastly, it shows to which extent the candidates change their fund-raising style as a response to

the amount of contributions their opponents receive.

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How Campaign Finance Affects Electoral Outcomes

V. Data Analysis, Assessment and Results

The question that is to be addressed is the hypothesis that campaign funds affect the

election outcome. It is further viewed that candidates who spend lavishly on their campaigns

are more likely to win the elections.

The tables below, as taken from the data gathered by Magee in the same The Policy

Journal, is a presentation of the estimate results from the model previously presented. In the

upper portion of the 2nd column is the marginal effect of the listed variable’s unit change on

the vote percentage received by the Democratic candidate. Said marginal effects came about

as the fraction of vote expected to be received by an average Democrat. At the bottom part

are the baseline vote fractions.

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How Campaign Finance Affects Electoral Outcomes

The meaning of the results found in these tables is that the contributions and

campaign finances of incumbents has no effect on the election outcome. This is due to the

fact, as show in the table, that the coefficient of the Republican as well as the Democratic

incumbents’ contributions, as shown in column no. 2, are both economically and statistically

insignificant.

What these estimates say, for instance, is that the incumbent Republican’s extra

disbursement of $100,000 can only lower the share of votes of the incumbent Republican by

a mere .06% points. On the other hand, the incumbent Democrat’s variable for contribution

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How Campaign Finance Affects Electoral Outcomes

is in the negative. This means that his share of vote decreases as his contributions show a

significant increase.

The coefficient estimates on the variables for campaign finances are different from the

incumbents as compared to the challengers at the 1% level. At the same time, it is also

different from that of the contribution variables for open seat candidates at the 5% level.

Furthermore, the impact on the Democrat of the received funds is basically the same to that

of the Republicans. The campaign finances variables’ coefficients are almost the same for

Republicans and Democrats.

While there is little effect to incumbents, the campaign funds have greater effect on

open seat candidates as well as the challengers. The campaign finances a challenger or open-

seat candidate received, which is about $100,000 more than that of the Democrat, resulted to

about 1% point vote lower for each Republican candidates. Regardless of the party affiliation,

tests show the same results.

What do these results indicate? It is clear that varying situations give different results.

The factors previously mentioned obviously play a big role in changing the results of what

seemed to be an easy question. The hypothesis is proven wrong and though some instances

make it right, it is not always the case. Thus, the hypothesis cannot be considered a theory.

With the huge number of variables tested, it is suffice to say that the results gathered

are quite reliable and thorough.

VI. Conclusion

Given all the data and the analysis made on it, it is very easy to deduct that campaign

finances, whether from contributions, own money or through debts, have no significant

effects on the election outcome, be it for presidency or even for other seats in the House or

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How Campaign Finance Affects Electoral Outcomes

the Senate. This is the beauty of the United States government. Money and its power are of

no significance to the minds of the majority. More weight is given to the candidates who they

think can give them the policies that will give them an improved life.

Being one of the most developed and rich countries in the world have made this

possible for the American citizens. Having been able to know what is going on with the

election procedures, knowing who the candidates are and what they stand for, learning all

about their policies and platforms ahead of time and all the necessary information to allow

them to make an informed and intelligent vote are made available to them.

Going back to the hypothesis, assumptions and common knowledge are things that

cannot be relied upon without concrete and verifiable evidences. The data analysis done may

be limited in scope. However, this is enough to disprove the hypothesis that election

outcomes can be affected by the size of campaign finances.

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How Campaign Finance Affects Electoral Outcomes

References

Cantor. J.E. and Whitaker L.P. (January, 2004). Bipartisan Campaign Reform Act of 2002:

Summary and Comparison with Previous Law [online]. Available in:

http://fpc.state.gov/documents/organization/41338.pdf

Erikson, R., and Palfrey, T. (1998). “Campaign Spending and Incumbency: An Alternative

Simultaneous Equations Approach.” Journal of Politics 60:2: 355–373.

Levitt, S. 1994.“Using Repeat Challengers to Estimate the Effects of Campaign Spending on

Election Outcomes in the U.S. House.” Journal of Political Economy 102 (August):

777–798.

Magee, C. (2001). Public Policy Brief: Campaign Contributions, Policy Decisions and

Electoral Outcomes: A Study of the Effects of Campaign Finance Reform.

Washington, DC: Bard Publications Office.

Morton, R., and Cameron, C. 1992. “Elections and the Theory of Campaign Contributions: A

Survey and Critical Analysis.” Economics and Politics 4:1: 79–108.

Strattman, T. (2005). “Some talk: Money in politics. A (partial) review of the

literature. “Public Choice 124: 1-2: 135-156.

Strattman, T. (January, 2006). Contribution Limits and the Effectiveness of Campaign

Spending [online]. Available at SSRN: http://ssrn.com/abstract=910509

U.S. Census Bureau (1997). Participation in Elections for Presidents and Representative

[online]. Available in: http://www.census.gov/prod/3/97pubs/97statab/election.pdf

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