Campaign Finance- Chris Barnes, Derek Becker, Louise Bick, Michael Canete, Masha Carey

The following is an introduction into Campaign Finance and the related issues:

Role of Politicians in Representative Democracies

• Politicians in representative democracies are individuals who represent people that

elected them by voting. Their role is to act on the people’s behalf in order to determine
definitive decisions that ideally resolve contentious issues in society.

• Controversial matters appear in nearly all situations and it is important for elected
representatives to react promptly and efficiently in order to settle affairs that are too big
for the general population to handle on their own.

• Politicians in a representative democracy need to utilize their resources efficiently in

order to comply with the wishes of the people they represent. However, to act in
accordance with every individual voter is not a realistic approach for politicians.

The Median Voter

• Theories have been developed over time in order to find out what the majority of people
aspire to achieve through their elected officials. The median voter theory states that
politicians choose outcomes desired by the median voter so that votes are maximized.

• It is important to note that realistically, the task of finding the median voter is daunting,
especially on the national scale. However, according to the theory, the closer a politician
gets to identifying the aims of the median voter, the better off they will be.

Campaign financing

• The information needed to find what the median voter needs is a process that requires
extensive research that may be outside a politician’s means to successfully execute.
Furthermore, ample supply of resources are needed in order to capably carry out the task
of advertising a politicians run for election. These resources are not readily available to
numerous politicians in the United States through public funds and they end up turning to
other sources for funds.
Lobbying

• One important example of alternative funding is provided by individuals and groups of

privately owned entities that support a particular candidate or political party they
represent. These special interest groups lobby elected representatives, through PACs
(Political Action Committee), in order to fulfill their own ambitions as well as provide an
integral service to a politician.

• Lobbying allows a politician to run a competitive campaign. These lobby groups supply
a large, diverse pool of resources needed to run a successful campaign. These resources
include detailed information on complicated issues, which include information about the
median voter, monetary donations and votes of the interest group themselves.

Free Rider Problem

• Even though there are a great deal of benefits from lobbying, there is considerable
potential for problems to arise. One common problem is the free rider problem.

• An example taken from page 241 of Jonathan Gruber’s Public Finance and Public Policy
gives an excellent example of how lobbying in the United States leads to these socially
inefficient outcomes as well as further clarification to these two perspectives.

• This example shows how small percentage of wealthy farmers are able to effectively
lobby for subsidies and price support funds from the government, while the taxpayers
who supply this revenue can do very little about it because of the difficulty to capably
organize in comparison to the minority of farmers.

Federal Election Commission:

• Congress established the Federal Election Commission (FEC) in 1975, to enforce the
Federal Election Campaign Act (FECA) - statute that governs the financing of federal
elections. FEC discloses and enforces campaign finance under the guidelines of the law,
and to oversees the public funding of Presidential elections.

• The Commission is made up of six members, who are appointed by the President and
confirmed by the Senate. Each member serves a six-year term, and two seats are subject
 to appointment every two years. By law, no more than three Commissioners can be
members of the same political party, and at least four votes are required for any official
Commission action.

• This structure was created to encourage nonpartisan decisions. The Chairmanship of the
Commission rotates among the members each year, with no member serving as Chairman
more than once during his or her term.

The following will talk about possibilities for campaign finance reform:

Public Financing

• Public financing was implemented to address concerns about the increasing influence
special interest groups wielded in elections and to place nominees of the two major
political parties on a more equal financial footing.

• Candidates can accept public funding or opt out of the system and avoid its limits on
contributions and spending. Republican and Democratic nominees in the general election
receive a fixed amount, indexed for inflation; nominees of other parties that garner more
than 5 percent of the vote also qualify, but for smaller shares.

• Pros: Recipients must not exceed a expenditure limit, agree to accept no private
contributions, spend no more than $50,000 of their own money, and adhere to a spending
limit. It also enables non “Big-money” candidates to participate in arena of federal
elections .

• Cons: Party committees and political action committees not coordinating their activities
with the candidate’s campaign can continue to raise outside funding, negating the
expenditure limitations

Imposing Campaign Expenditure Limits

• Pros: elected officials could spend more time focusing on legislative issues and by
limiting politicians’ fears of campaign reprisal of funds for unpopular votes with
business, it would lessen conflicts of interest and enhance the politicians’ ability to act in
the public interest.
 • Cons: Politicians constantly find loopholes in these types system making provisions and
they do not encompass an institutional framework to administer their provisions
effectively. Such as with the case of the FEC.

Increase Individual and PAC Contribution Limits

• Pros: Raising contributions of individuals and PAC would allow groups/individuals to

counteract the influence of lobbying organizations and other special interest group funds
in the election process.

• Cons: Big businesses and special interest groups will use these laws to their advantage,
such as in the form of personal donations in affiliations of certain companies

Increased Disclosure

• Allows the public to be informed on what money politicians are accepting, demanding
higher accountability for both politicians receiving money and individuals/agencies who
are donating funds

The following will talk about public concern issues brought about by campaign finance:

• “The real problem is people aren’t organized enough to make it worth the while of
politicians to pay attention to ordinary people. The disadvantage the average Joe has
against Goldman Sachs is Goldman can concentrate its campaign contributions in its
favor. The typical politician is not going to upset or alienate the five most powerful
investment banks because he knows realistically he will jeopardize 30% or 35% of his
next election cycle’s contributions.” - Matt Taibbi

Campaign Finance and the Economic Crisis

• A poll by Lake Research Partners and Tarrance Group found that 73% of voters believe
that political donations to lawmakers were “a major factor in causing the current financial
crisis on Wall Street.”
 • ABC News, September 26, 2008: Goldman Sachs spends $43 million on lobbying and
campaign contributions to cultivate friends and influence in Washington since 1989.

• The Process: 1. big banks give government contributions. 2. big banks engage in risky
behavior. 3. financial crisis ensues. 4. the government, as beneficiaries, bails out its
friends. 5. big banks engage in the same behavior all over again (also using bailout
money to pay out $14 billion in “bonuses”)

Campaign Finance and the Energy Crisis

• $550,000 from S. California Edison and Pacific Gas & Electric to California Governor
Davis in donations, who was “found asleep at the wheel while his state careened toward
an energy disaster”

• Enron manipulates California’s power market. (Kenneth Lay, chairman of Enron, gave
$93,000 to Gov. Davis: also single biggest contributor to Bush’s presidential run with
more than $500,000 in campaign donations and $100,000 for inaugural festivities)

Campaign Finance and Healthcare Reform

• Health insurers and employees gave $2.2 million to top 10 recipients in House and Senate
since 2005. Drug makers gave more than $3.3 million. Since the start of 2009,
healthcare industry groups have contributed nearly $20 million to federal candidates and
parties. Healthcare sector completes great triad with financial services and energy
interests as the most powerful political forces in Washington

Campaign Finance and Individuals

• Allen Stanford ($8 billion in fraud) and Bernie Madoff ($65 billion in fraud) gave to
campaigns of both Republican and Democratic candidates in various states where they
could not even vote. Stanford alone gave $2.4 million since 2000

The following will talk about organizations involved in Campaign Finance Reform:

Center for Responsive Politics

 • Center for Responsive Politics (CRP) is the nation's premier research group tracking
money in U.S. politics and its effect on elections and public policy. It is nonpartisan,
independent and nonprofit. The organization aims to create a more educated voter, an
involved citizenry and a more responsive government.

• Goals: Inform citizens, empower voters, and advocate for a transparent and responsive
government

Common Cause

• It is a nonpartisan, nonprofit advocacy organization. It is a vehicle for citizens to make

their voices heard in the political process and to hold their elected leaders accountable to
the public interest.

• Goals: Promote fair and honest elections, hold government officials accountable for
working within the rule of law and under high standards of ethical conduct, protect the
civil rights and civil liberties of all Americans, control the excessive influence of money
on government decisions and elections, and shed light on the connections between
lobbying money coming in and government expenditures going out.

Public Citizen

• It is a national, nonprofit consumer advocacy organization. It represents consumer

interests in congress, the executive branch and the courts.

• Goals: Fight for openness and democratic accountability in government, right for
consumers to seek restoration in the courts, clean, safe and sustainable energy sources,
social and economic justice in trade policies, strong health, safety and environmental
protections, and safe, effective and affordable prescription drugs and health care.

Sunlight Foundation

• It is a non-partisan non-profit organization. Campaign to engage citizens in demanding

the policies that will open government and hold their elected officials accountable for
being transparent. Investigative organization that uses the data we uncover to demonstrate
why we need new policies that free government data.
 Works Cited

Gruber, Jonathan. Public Finance and Public Policy. 2nd ed. New York City: Worth,
2007.

http://www.npr.org/templates/story/story.php?storyId=95957148

http://www.fec.gov/about.shtml

http://www.commoncause.org

http://www.fec.gov/info/appfour.htm

http://www.opensecrets.org