Campaign Finance

Hundreds of millions of dollars are spent on elections every year in the United States of America. While candidates in presidential elections tend to spend roughly the same amount of money on their campaigns, there are sometimes huge disparities between congressional candidates. In general, incumbents raise money much more easily than challengers. During the 2004 election cycle, House and Senate incumbents raised and spent more than $680 million on their campaigns compared to only the $192 million spent by challengers. The average Senate incumbent raised more than $8 million, compared to less than $1 million for the average challenger. House incumbents also outpaced their challengers by a healthy campaign spending margin, raising an average of about $1.1 million compared to less than $200,000 for challengers. This huge disparity in spending in favor of incumbents is facilitated in large part by a huge advantage in raising money from political action committees (PACs), the divisions of interest groups that are legally registered and authorized to donate money to candidates for federal office. PACs generally give more than three-quarters of their money to incumbents.

2004 Congressional Election Spending


Candidate Status

U.S. House

U.S. Senate

Incumbents

$456,859,509

$223,964,295

Challengers

$112,498,172

$79,852,117

Open-Seat Candidates
$127,051,491
$238,890,389

TOTAL

$696,409,172

$542,706,801

SOURCE: Federal Election Commission

Partly due to the large amounts of money they raise and partly due to their generally popular reputations and political experience, House incumbents win about 95% of the time and Senate incumbents win about 90% of the time. Spending large amounts of money, however, does not guarantee that an incumbent will win. In fact, incumbents generally do not have to raise and spend exorbitant amounts of money on their campaigns unless they are facing a serious challenge. Many incumbents who lose reelection bids do so while spending more money on their campaigns than ever before. When an incumbent is in trouble and facing strong competition he or she is compelled to raise and spend much more than they would in less politically threatening circumstances.

While elections involving incumbents are generally not very competitive, "open seat" races, contests in which no incumbent is seeking reelection, tend to be very competitive. One of the most important reasons for this heightened level of competition is that neither candidate in an open seat election has a built-in fund-raising advantage.

Federal Campaign Law

The Federal Election Campaign Act of 1974 established limits on the amount of money that can be given to candidates for federal office by individuals, PACs and political parties. The Act also limited the overall amount of money a candidate could spend on his or her election, but the Supreme Court declared that provision an unconstitutional limitation on free speech (see Buckley v. Valeo). In 2002, the Bipartisan Campaign Reform Act (BCRA) was enacted. While many of the underlying principles of the original FEC Act were reaffirmed (e.g., individual contribution limits, public reporting requirements), several important changes were made. Most significantly so-called "soft money" contributions to political parties were banned. These previously unregulated donations were made by wealthy contributors to parties for the purposes of "party building." Activities carried out under this banner, however, were virtually indistinguishable from traditional campaign activities. The table below provides a summary of current federal campaign regulations. (Each state has separate guidelines and rules for state and local elections.)

Another important feature of the BCRA is the so-called "millionaire's amendment." This provision of the law is aimed at promoting campaign spending equality when a wealthy candidate (i.e. a "millionaire") makes significant personal contributions to his or her own campaign. If a wealthy candidate exceeds a specific threshold of personal spending, his or her opponent is afforded greater fundraising flexibility than normally allowed under the law. The spending threshold is based in large part on "voting age population," so it is different for candidates in each state. The threshold is about $630,000 in the least populous state (Wyoming) and about $2,700,000 in California. If a wealthy candidate exceeds the spending threshold the opposing candidate may accept increased individual contributions. In some cases, national and state party committees may also be allowed to make unlimited coordinated expenses on the candidate's behalf.

The "millionaire's amendment" reflects another longer-standing campaign finance mechanism aimed at limiting the influence of wealthy candidates or individual wealthy contributors. Since 1976, presidential elections have been funded differently than other federal elections. To limit the impact of large individual contributions, a public funding system that matches the first $250 of each individual contribution to candidates during the primary election campaign. The fund also helps finance the national parties' conventions and funds the major parties' nominees during the general election campaign. By accepting public funding, presidential candidates also agree to abide by overall campaign spending limits. Some presidential candidates (e.g. Ross Perot in 1992 and George W. Bush in the 2000 primaries) have opted to forego this funding in order to exceed these spending limits.

For more detailed information, visit the Federal Election Commission web site.

Federal Campaign Finance Rules


What's Legal?

During the 2005-2006 election cycle, an Individual May Give up to:

There is no limit on individual independent expenditures made in support or opposition of a candidate. Such expenditures many not be coordinated with a candidate and they are subject to special reporting requirements.

What's Not!

All of the Following are Prohibited:

SOURCE: Federal Election Laws, Compiled by the Federal Election Commission