HGov: The Parties and Money

Hard v Soft Money

Most political observers point to funding as a key ingredient for the success of congressional and presidential campaigns. Costs escalates because the use of the media by the candidates, the increase in direct mailing, the reliance on polling, and an increase of campaign staff salaries. There is a definite correlation between the amount of money raised and spent and who wins an election.Even though there is federal funding of presidential campaigns, the costs of those elections has skyrocketed.

Candidates raise funds by accepting small contributions of $5 and $10, but this accounts for the smallest percentage of funds raised. One of the complaints by the average voter is that in order to run for elective office, you must have a significant financial base. Political action committees donate millions of dollars to congressional candidates. Election committees are also set up for candidates, and this becomes another means for groups to channel money into the coffers of political hopefuls.Campaign donations are considered a direct form of political participation, but there have been many questions raised regarding the kind of influence and payback these contributors expect.

Federal law regulates campaign financing. The 1971 Federal election Campaign Act set up restrictions on the amount of advertising, created disclosure of contributions over$100, and limited the amount of personal contributions candidates and their relatives could make on their own behalf. The Revenue Act of 1971 allowed private contributions through tax credits and tax deductions. A $1 tax write-off was allowed on federal income taxes. This allocation had the effect of public subsidizing federal elections. The 1974 Federal Election Campaign Act established a six-person Federal Election Commission whose responsibility it would be to enforce the provisions of the law and establish matching federal funds for presidential candidates in primaries and the general elections. In order to receive these funds, a candidate had to raise $5000 in at least 20 states. The candidate would then be eligible for matching funds as long as the candidate agreed to disclose campaign contributions. The public funding of presidential campaigns has had a significant impact on the election process since it was instituted. Money has been given to candidates during the primary campaign, to the parties to help fund national conventions, and to candidates in the general election campaign. By accepting public funding, candidates must pledge that they will not spend more than what was given to them and not accept other kinds of specified donations. There were loopholes including PAC donations and so-called soft money raised by state and local organizations.

One of the central issues raised during the 1996 presidential election was campaign finance abuses. By the end of the campaign it became apparent that soft money was abused, foreign money was laundered, and that there was a possibility that China was using illegal contributions to influence local, congressional, and presidential elections. Both parties were criticized for using soft money as a way to create political commercials. This broke a law preventing a national party from using soft money to air ads favoring specific candidates. As a result of the scandal, both houses held hearings regarding the fundraising practices of both parties. The objective of the hearings was to investigate the extent of the illegal use of funds with the end result being the passage of new campaign finance reform laws.

After the escalating cost of the 2000 presidential election, campaign finance reform reemerged as a political issue. Congress passed the McCain-Feingold Act which included a ban on all soft money, increased individual hard money donations, and banned special interest political ads paid for by soft money prior to the primary and general election. In 2002, the Supreme Court ruled that the law was unconstitutional. In 2004, both parties increased the amount of hard money raised. Special interest groups got around the ban on soft money donations by forming what was called “527” groups. These groups raised large amounts of soft money but were protected by the tax code, enabling them to run independent advocacy ads.



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