Hard Facts - Hard Money in the 2000 Elections

Hard Facts

Hard Money in the 2000 Elections

 

October 2000

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Hard Facts   Hard Money in the 2000 Elections

"All I can tell you...is that this is all clean, hard donors. These are all disclosed dollars. These are dollars that are protected under campaign finance reform."1 —New York Senate candidate Rick Lazio, who has raised $29.1 million in hard money for his campaign.

"[Democratic National Committee Spokeswoman Jennifer] Backus said the event was consistent with the party's support for campaign finance reform because it collected only hard money. The $5.2 million raised tonight was the largest hard-money event in Democratic Party history, she said." 2

Jan Baran, attorney for the Colorado Republican Party, discussing litigation that would increase the importance of hard money vis-a-vis soft money: "It's going to make a practical difference in that it will give political parties discretion how to best spend the cleanest money in the system on behalf of candidates." 3

It is time for some hard facts about the billions of dollars fueling the 2000 federal elections. To listen to politicians and political operatives talk, soft money is the only ailment plaguing our body politic. Yet for every one soft dollar raised by national political parties in the 2000 federal elections there have been nearly five hard dollars raised by the parties and federal candidates: $256 million in party soft money versus $1.3 billion in hard.4

The hard money is not "cleaner" or "better" than the soft money. In fact, nearly two-thirds of hard money comes from a tiny group of mostly wealthy individuals and special interest Political Action Committees (PACs). Many of these hard money donors are the same cast of characters that are giving soft money contributions, and they are giving for the same reasons: to gain access to elected officials and to influence policy. Another 12 percent of hard money comes from wealthy candidates contributing to their own campaigns as they seek not just access, but membership in Washington’s halls of power.

There is a purpose behind the mislabeling of hard money as "good" political money. It opens the door for hard-money-dependent candidates to falsely claim that they are running campaigns free of corrupting contributions. And if hard money contributions are perceived as innocent, the campaign finance reform debate becomes confined to regulation of soft money, and the door is opened to the unholy tradeoff of banning soft money in exchange for loosening regulations on hard money.

Effective reform must address both hard and soft money contributions. Public Campaign supports a comprehensive Clean Money system that does exactly that, by providing public funds and eliminating the need for candidates to depend on special interest contributions, hard or soft.

How Much Hard and How Much Soft?

Election costs are spiraling ever upward. The 2000 federal elections are expected to cost about $3 billion.5 That’s over one-third more than the 1996 federal elections cost of $2.2 billion. By June 30, 2000, 18 months into the 2000 election cycle, presidential, House and Senate candidates, and national party committees had already collected more than $1.6 billion, compared to $1.2 billion at the same point in 1996.

Hard money increased by $327 million—more than three times the $106 million increase in party soft money. As a percentage of party fundraising, soft money increased from 18 percent of the parties’ overall fundraising in 1992 to 40 percent in 2000.

 

 

The Basics of Hard Money Versus Soft Money

Hard money is the common term for any contributions regulated by the Federal Election Campaign Act (FECA). The law sets limits on contributions by individuals, political parties, and Political Action Committees (PACs). Under the rules, individuals may give a maximum of $25,000 in a calendar year to federal candidates, parties, and PACs. Contributions to a particular candidate, however, are limited to $1,000 for the primary and $1,000 for the general election. An individual may give no more than $5,000 to a PAC and $20,000 to a national party committee. Corporations and labor unions are not allowed to give any direct political contributions to candidates. However, they are allowed to set up separate, segregated funds—PACs—to raise contributions from employees and members. A PAC may give up to $5,000 per election to a candidate. PACs may also make unlimited independent expenditures, which do not go directly to a candidate, but advocate for or against a particular candidate.

Party soft money describes political contributions that are not subject to the legal limits of FECA. An individual, corporation, union—any entity—is allowed to make unlimited contributions to a national party committee.6 The party may use this money for state and local campaigns, party building, and voter drives. Technically, soft money may not be used to advocate for or against a particular candidate. The political parties, however, have become adept at skirting this restriction. Often a political party will run an ad that focuses on a particular issue—say gun control or the environment—and will discuss a candidate’s position on that issue. By not explicitly asking voters to "vote for" or "vote against" a particular candidate, the parties maintain the fiction that their advertisements are not expressly advocating for a candidate’s victory or defeat. Under this pretense, parties can use soft money, in part, to pay for these ads (under the rules, a portion of the cost of the ads must come from hard money).

There is another kind of soft money—money spent by outside groups such as the Chamber of Commerce or the AFL-CIO—on issue advertisements that supposedly do not directly advocate a candidate but for all practical purposes, do. Spending by these groups is not reported to the FEC and is not included in the soft money amounts reported here.7

However, when we look at overall fundraising—not just by parties but by candidates, too, we see that party soft money remains a small fraction of the total money raised—fewer than two out of every ten dollars.

These statistics, skewed though they are, actually understate the relative importance of hard money in the political process. Hard money can be, for several reasons, far more valuable as political currency than soft money.

  • Early money is hard money. The name of EMILY’s List, the network of political donors founded to help elect pro-choice Democratic women, is derived from the political slogan "Early Money Is Like Yeast—It Makes the Dough Rise." Or, as former House member Vic Fazio said, "People are looking for winners...Early money has been one of the indicators that rarely goes wrong."

    Early money means viability—or intimidation. One of the first things political contributors, the political parties and other potential supporters want to know about a new candidate is whether they can raise enough money for a viable candidacy. The way for a candidate to show viability is by accumulating early contributions directly for their campaign treasury. This type of contribution is hard money.8

    Potential supporters also want to know how much the opponent will raise. Incumbents, and some open seat-candidates, scare off challengers, and support for challengers, with large war chests of early hard money contributions from wealthy individuals and PACs. This is one reason most experts see only 30 to 40 congressional races as competitive this year.

  • Party soft money is useless without hard money. Federal law requires that party soft money may only be spent in combination with hard money according to a complex state-by-state formula—in a presidential election year, roughly two hard dollars for every one soft dollar. It is as if a store would only accept your $1 bill if you also provided two Sacagawea dollar coins along with it.

  • Hard money is more versatile than soft money. Hard money may be used for any election expense, from polling to phone-banking to advertisements that directly urge the public to vote for the candidate. Technically, soft money cannot be used to fund ads that use phrases such as "vote for" or "vote against." As a practical matter, this isn’t much of a limitation. But hard money is, nevertheless, more valuable because it is not subject to these limitations.

Thus, while soft money is significant, particularly in races important to national special interests, hard money constitutes 81 percent of dollars raised by federal candidates and parties and plays a special role in the financing of political campaigns.

The importance of hard money is reflected in the fundraising focus of federal congressional campaigns. For Congressional candidates, hard money provides the greatest part by far of campaign cash. By June 30, 2000, Senate candidates had raised $259.7 million in hard money. The National Republican Senatorial Committee and the Democratic Senatorial Campaign Committee raised another $55.5 million in hard money. The sum of these amounts dwarf the $51.4 million in soft money raised by the Senate party committees. The same pattern holds for the House. Candidates for House seats raised $393 million—and the Democratic Congressional Campaign Committee and the National Republican Congressional Committee raised another $80.5 million in hard money. In comparison, the committees raised only $62.9 million in soft money. For the last several months of the campaign, both parties have established special programs to raise hard money for Congressional candidates.9

Notably, the Senate race that has produced the most press coverage on the problem of soft money—the race between Rep. Rick Lazio (R-NY) and Hillary Rodham Clinton — is also the most expensive hard money Senate race. As of their September reports to the Federal Election Commission (FEC), Lazio had collected $29.1 million, while Clinton had received $21 million since the beginning of the race. To put that in perspective, party and outside group spending on television advertising on the two candidates’ behalf through September 20, 2000 amounted to just $6.1 million.10

In the presidential race, both Al Gore and George W. Bush collected enormous sums of hard money before the beginning of the 2000 primaries. Both candidates recruited volunteers (Bush calls them "pioneers") to raise at least $100,000 apiece in hard money donations from individuals.

Bush turned down partial public financing in the primaries so that he would face no limit on the amount of money he could spend—he ended up with more than $98 million in hard individual donations, and another $2.2 million from PACs. Credit card giant MBNA America Bank’s PAC, its executives and their families were big Bush supporters—giving Bush more than $233,000 in hard money.

Gore, who did accept partial public funding, and therefore was constrained by limits on his spending, collected $44 million in individual hard contributions.11 He received over $130,000 from accounting firm Ernst & Young executives and their families.

Neither Bush nor Gore have recently received significant direct hard money contributions because both candidates have accepted public funds for the general election in exchange for promising not to raise more hard money.12

Who Gives and Why

Hard money is the most important source of campaign contributions, but it comes in smaller bites than soft money. Can contributions of $1,000 to $20,000 really buy significant influence? Yes, and they do, because most of it comes from an elite donor class and groups of donors with shared policy agendas.

Generous political donors are not representative of the rest of America. Only one-quarter of one percent of the population of the United States gave a hard money contribution of $200 or more in the 1996 elections; one-tenth of one percent gave $1,000 or more.13 Both Bush and Gore collected about three-quarters of their contributions from donors giving the maximum $1,000 contribution.14

A survey of donors of $200 or more revealed that four-fifths had an annual family income of more than $100,000 a year, only one in 20 had annual incomes of $50,000 or less. More than nine out of ten were white.15 By comparison twelve percent of U.S. households have total income of $100,000 or more; 60 percent have total income of $50,000 or less.16 Twenty-nine percent are people of color.17

PACs, almost by definition, represent special interests. According to the Center for Responsive Politics, nearly 70 percent of PAC contributions in the 2000 election cycle comes from business interests; 21 percent comes from labor, and just 11 percent from ideological groups or other sources.

Nearly two-thirds of the hard money contributed during the first 18 months of the 2000 election cycle by presidential and congressional candidates and parties came from the mostly wealthy individuals who gave $200 or more and special interest PACs.

Candidates wealthy enough to fund themselves are another source of political money—about 12 percent of total hard money raised during the first 18 months of this election cycle. Democrat Jon Corzine, who earned a fortune working for investment firm Goldman Sachs, gave himself $42.4 million toward his bid for a New Jersey Senate race. Maria Cantwell, who became wealthy working as a senior vice president for the high-tech company RealNetworks, gave herself $6.1 million.

When hard money donors are asked what they get for their money, they tell it straight: they gain access that others don’t. A recent poll of political donors by Lake, Snell, Perry and Associates commissioned by the Nation Institute and the Institute for America’s Future revealed that 54 percent of large donors said they had spoken personally to a federal official in just the past year—clearly a far larger percentage than the general population.18 A survey of donors in the 1996 presidential elections revealed that 76 percent said "influencing policy/government" was a "very important" reason why they gave money.19

The truth is that the "donor class" has far more to say about who gets elected and where they stand on the issues than do the vast majority of Americans. That Congress and presidents are more responsive to the needs of large businesses and the wealthy than to ordinary Americans should be no surprise.

The Special Interests Behind the Numbers

Corporate interests take their politics seriously. And they show it by pouring serious money into political campaigns. To be fair, at times, businesses are forced into the political arena simply to keep pace with their competitors. They need to play, to gain access to compete. Nevertheless, frequently, the big money battles between competitors in the political arena leaves little room for consideration of the broader interests of most Americans. And, on some issues, corporate interests are simply seeking policy decisions that benefit them and have nothing to do with their competitors.

The Center for Responsive Politics (CRP), a nonpartisan, nonprofit group, analyzes all political contributions—hard and soft—by industry. As a result, it is possible to see that hard and soft money both play a role in influencing policy on Capitol Hill and in the White House. Below is a sampling of industries with special interests to fight for in Washington—and how they contribute to make sure their voices are heard loud and clear.

Automotive Industry

It took a true tragedy—more than 100 people dead in accidents involving Firestone tires on Ford Explorers—before Congress would address dangerous weaknesses in federal auto safety regulation. In October 2000, Congress passed legislation that will require testing for rollover potential of vehicles and upgrade 30-year-old standards for tires. According to auto safety advocates, such improvements should have been made years ago—and the bill does not go nearly far enough. "Congress passed a face-saving bill for industry, not a life-saving bill for the public," stated Public Citizen President Joan Claybrook. The auto industry is a generous purveyor of campaign cash—and 75 percent comes in the form of hard money contributions.

Computers/Internet

As the computer industry’s concerns in Washington have grown, so have its campaign contributions. Microsoft alone already has increased its political giving nearly fifteen-fold compared to the 1996 election cycle, from $237,000 to $3.5 million. It was in 1996 that the Justice Department started investigating Microsoft for the possible violation of a 1994 consent decree meant to prevent antitrust abuses. Overall, the computer industry already has given nearly three times as much in the 2000 election cycle as contributed in the entire 1996 election cycle. The industry scored a big win in October when Congress approved nearly 600,000 new visas over the next three years for foreign workers to enter the U.S. to take high-tech jobs. The computer industry is dividing its campaign contributions almost fifty-fifty between hard and soft money.

Oil and Gas

With gas prices the highest they have been for years, consumers are mad—and they are peppering candidates for office with questions about what they are going to do about the problem if elected. The oil and gas industry is lobbying for its own solution: opening up the Arctic National Wildlife Refuge (ANWR) in Alaska to drilling. The refuge, says the Natural Resources Defense Council, is "one of the last true wilderness areas left on earth," containing forests, peaks, tundra, wetlands, and a dozen rivers, not to mention polar bears, musk oxen, grizzlies, golden eagles, snowy owls and the world’s largest caribou herds. The future of the refuge will rest in the hands of those elected this November. The oil and gas industry gives more than 50 percent of its campaign contributions in the form of hard money.

Pharmaceutical and Health Products

No issue has been hotter this election than the high cost of prescription drugs for seniors. Both the Democrats and the Republicans have put forth plans to deal with the problem. According to the consumer group Public Citizen, the Democratic plan provides more generous benefits but lacks adequate controls over rising drug costs, while the Republican plan falls short because it depends on private industry to provide coverage. The pharmaceutical industry has been lobbying hard and paying close attention to this November’s elections, contributing nearly $23 million to candidates and parties, 41 percent of it in hard money.

Securities and Investment

Wall Street investment firms such as Merrill Lynch and Morgan Stanley, Dean Witter have always been generous supporters of politicians of both political parties. With interests as varied as promoting international trade agreements to privatization of Social Security, they have reason to spread their good will around. There is no question that funneling public retirement funds into the private market—as would happen under various proposals to privatize Social Security—would be a huge windfall for investment firms. The Senators, House members, and President elected in November will be crucial players in deciding whether this happens and how. Nearly 60 percent of Wall Street’s campaign cash comes in the form of hard money.

Television/Movies/Music

Facing the prospect of a government crackdown on violence and sex portrayed in popular music, movies, and television shows, not to mention numerous business concerns, such as enforcing strict copyright rules overseas, the entertainment industry is pouring campaign cash into the coffers of the politicians who will handle these issues. In the 2000 elections, over half of the industry’s campaign contributions are hard money.

Conclusion

The basic distinction between hard and soft money is not that one is "good" and "clean" and one is "bad" and "dirty." It is simply a legal distinction—one kind of money can be collected and used in one way, and the other kind in another way. Soft money is easier for parties to collect, because contributions are not limited or restricted—$50,000 may be given in one check instead of 50 separate checks from individuals. But money given for influence is money given for influence, no matter what it is called or its immediate source. And there is a lot more hard money than soft money being given.

Comprehensive campaign finance reform must address the whole issue of special interest money in elections, including hard money. If it does not, the American people will be stuck with the same problem they have now—trying to make their voices heard over the ka-ching of special interest cash.

Public Campaign supports Clean Money Campaign Reform. This approach creates a new way of funding elections rather than trying to sew up the many loopholes in the current system. The link between special interests and politicians is severed, because candidates do not have to rely on their money in order to run a viable campaign for public office. Under a Clean Money campaign finance system, candidates who agree to forego private contributions and accept strict spending limits receive limited money to run their campaigns from a publicly financed Clean Elections fund. If the candidate’s opponent opts out of the Clean Money system and runs on private money, then the Clean Money candidate can qualify for additional matching funds. Non-party expenditures on "issue ads" are brought into the regulatory framework and additional funds provided to Clean Money candidates targeted by the ads. There is no more political party "soft money," and, aside from small qualifying contributions, no more "hard money" either for Clean Money candidates.

Arizona, Maine, Massachusetts, and Vermont have new Clean Money systems. Missouri and Oregon voters have the opportunity this election to approve Clean Money-style initiatives in their states. On the federal level, Senator Paul Wellstone (D-Minn.) and Representative John Tierney (D-Mass.) have proposed legislation and Vice-President Al Gore has stated his support for full public funding of federal general elections. Although reforms that ban soft money are an essential step, these states and leaders recognize the fundamental truth that hard money is just as much a corrupting influence on our elections as soft money—and the best solution to the corrosive effects of the current system is Clean Money Campaign Reform.

1 Adam Nagourney, The New York Times, September 6, 2000, p. B6.
2 John M. Broder, “Democrats: The Money; Corporations Underwrite the Democrats’ Convention,” The New York Times, August 18, 2000, p. A19.
3 Charles Lane, “High Court to Review FEC Limits,” The Washington Post, October 11, 2000, p. A8.


4 This data is for the first 18 months of the 2000 election cycle.
5 “Who’s Paying For This Election?” Center for Responsive Politics, October 2000.
6 Non-profit organizations, however, are subject to tax law limitations independent of FECA.
7 Total issue ad spending has been estimated by the Annenberg Public Policy Center of the University of Pennsylvania to be about $342 million through August 21, 2000. Much of this spending, however, was not by outside groups but by the political parties. Even if this figure is added to total party soft money collections, a calculation that double-counts the amount collected by parties and spent on party issue advertising, it adds up to less than half of total hard money for the first 18 months of 2000. Thus, even if outside group issue advertising is included in soft money, it amounts to far less than hard money.
8 Juliet Eilperin, “Some House Challengers Outraise Incumbents,” The Washington Post, April 23, 2000, p. A4.
9 Ethan Wallison, “Democrats Eye Spending Blitz DCCC Targets $50 Million For 29 Key Races,” Roll Call, September 28, 2000. “McCain Cuts Ads, Ready to Go On the Trail,” National Journal’s House Race Hotline, September 28, 2000.
10 News Release, The Brennan Center for Justice at New York University, September 28, 2000.
11 Based on Federal Election Commission data released on October 1, 2000, analyzed by the Center for Responsive Politics, www.opensecrets.org/2000elect/source/AllCands.htm.
12 Under the presidential partial public financing system, presidential candidates must meet certain conditions to qualify for public funds. To receive funding in the primary, a candidate must show that he or she has broad-based public support by raising $5,000 in increments of $250 per contributor from each of at least 20 states. The federal government will then match up to $250 of an individual’s total contributions to the candidate, if the candidate abides by certain spending limits. In the general election, a presidential nominee of a major party may be eligible for a $20 million grant (plus a cost-of-living adjustment) if, again, certain spending limits are met and no more private contributions are accepted. However, there are many loopholes in this law-ways for donors to contribute both hard and soft money not subject to these conditions.
13 “Who’s Paying: Stats at a Glance on the Funding of U.S. Elections,” Center for Responsive Politics, 1998.
14 Who’s Paying For This Election? Center for Responsive Politics, October 2000.
15 John Green, et. al., “Individual Congressional Campaign Contributors: Wealthy, Conservative and Reform-Minded,” The Joyce Foundation, June 1998.
16

U.S. Census Bureau, Current Population Reports, P60-209, Money Income in the United States: 1999, U.S. Government Printing Office, Washington, DC, 2000, Table 2.
17 “Resident Population Estimates of the United States by Sex, Race, and Hispanic Origin,” U.S. Census Bureau, September 27, 2000.
18 Celinda Lake and Robert Borosage, “Money Talks,” The Nation, August 21/28, 2000.
19 Peter L. Francia, et. al., “Individual Donors in the 1996 Federal Elections,” in Green, John C., Financing the 1996 Election, M.E. Sharpe, 1999.