Financing the 2008 Election

Brookings Institution Press

Copyright © 2011 THE BROOKINGS INSTITUTION
All right reserved.
ISBN: 978-0-8157-0332-7

Contents

Acknowledgments…………………………………………………………………………………..ix1 Adaptation and Innovation in the Financing of the 2008 Elections David B. Magleby……………………..12 The Regulatory Environment of the 2008 Elections Anthony Corrado…………………………………….483 Financing the 2008 Presidential Nomination Campaigns John C. Green and Diana Kingsbury…………………864 Financing the 2008 Presidential General Election Anthony Corrado…………………………………….1275 Financing the 2008 Congressional Elections Paul S. Herrnson and Stephanie Perry Curtis…………………1666 Political Parties and the Financing of the 2008 Elections David B. Magleby……………………………2107 Interest Groups and the Financing of the 2008 Elections Allan Cigler…………………………………2498 Lessons for Reformers Thomas E. Mann……………………………………………………………..290Glossary…………………………………………………………………………………………307Contributors……………………………………………………………………………………..321Index……………………………………………………………………………………………323

Chapter One

Adaptation and Innovation in the Financing of the 2008 Elections

DAVID B. MAGLEBY

The 2008 elections were by any standard historic. The nation elected its first African American president, and the Republicans nominated their first female candidate for vice president. More money was raised and spent on federal contests than in any election in U.S. history. Moreover, the way money was raised by some candidates and party committees has the potential to transform American politics for years to come. Barack Obama raised a record-setting $745 million for his campaign. While Obama’s fundraising was extraordinary, other federal candidates, political party committees, and interest groups also raised and spent record-setting amounts in the 2008 election cycle.

The 2008 election was the second in a row in which the Democrats picked up more than twenty-eight seats in Congress, something neither party has done since the Republicans gained twenty-eight seats in 1950 followed by a gain of twenty-two in 1952. Part of the reason for the Democrats’ recent ascendancy is the success of their party congressional campaign committees in raising money in limited amounts from individuals. The Democratic congressional campaign committees substantially outspent the Republicans.

Other components of the Democrats’ dominance in 2008 included their skillful use of technology in voter contacting, fundraising, and volunteer recruiting. Compared with their efforts in previous years, Democratic-leaning interest groups cooperated much more efficiently in 2008, sharing membership and contact information through a new database that appeared to best the microtargeting capacity of the Republican National Committee’s voter tracking system. Another Democratic advantage was the absence of successful Republican front groups. While interest group spending overall rose in 2008, no group mounted attack ads on the scale of those used against presidential candidates in 2000 or 2004. Perhaps the most important advantage for Democratic candidates was the national issue agenda, especially public disapproval of President George W. Bush.

Issue Agenda

The election was in many respects a referendum on the Bush presidency. Many in the public strongly linked the Bush administration with increasingly negative opinion toward the war in Iraq. The war became a distinct liability for Republicans in 2006 and 2008, though they had used the issue to their advantage during the 2002 and 2004 elections. Opposition to the Iraq War provided presidential candidates like Obama and Republican Ron Paul with an early springboard in recruiting supporters and raising money. Support for the war, especially for the 2007 troop surge, was a major focus of the McCain campaign, but the issue faded in importance following the collapse of Bear Stearns and Lehman Brothers, two large financial firms, in mid-September. President Bush and senior ad ministration officials sought to calm an anxious public as stock values dropped and the possibility of an economic depression loomed. John McCain suspended his campaign to return to Washington to attend to the crisis, while Obama did not. Instead, Obama announced that he intended to participate in the first presidential debate, with or without McCain. President Bush convened a meeting at the White House attended by McCain and Obama. After the meeting McCain returned to campaigning and participated in the presidential debate. The sense of uncertainty about the government response to the economic crisis was amplified when House Republicans initially voted against the administration’s bailout proposal. Early in the crisis, McCain repeated a statement he had made earlier that the “basics of the economy are sound.” The Obama campaign used this statement as an example of McCain’s lack of understanding about the economy.

President Bush’s declining popularity helped the Democrats not only in the presidential race but also in key congressional battlegrounds. Democratic congressional candidates, including some freshmen incumbents and Democrats running for open seats that had been Republican going into the election, also ran against Bush at least as much as against their Republican opponents. In the North Carolina Senate race between Republican incumbent Elizabeth Dole and Democratic challenger Kay Hagan, for example, the Democratic Senatorial Campaign Committee ran an effective ad in which two elderly men sitting on a porch debated whether Senator Dole is ninety-two or ninety-three—highlighting the fact that she voted in agreement with President Bush 92 percent of the time and was ranked ninety-third in effectiveness in the Senate.

More generally, the Obama campaign established change as the overriding message of the election and reinforced that theme repeatedly. Obama promised to make changes in international relations (particularly the war in Iraq) and domestically in energy, health care, education, and economic and regulatory policy. Also central to Obama’s campaign was the theme of changing the tone in Washington. Obama’s nomination itself symbolized a dramatic change, and his possible election as the first African American president became a subtext for the entire election. McCain tried to change the theme of the election from a referendum on Bush and eight years of Republican control of the White House to a referendum on Obama, highlighting, as Hillary Clinton had done in the primary campaign, his inexperience. But those efforts largely failed.

More Candidates, More States in Play

As is the norm in presidential election years, the focus in 2008 was on the contest for the presidency. The absence of a current or former president or vice president seeking the nomination, for the first time in more than half a century, attracted a wide field of candidates in both parties. Three sitting U.S. senators became the central players in the nomination phase: Republican senator John McCain of Arizona all but secured the Republican nomination after the Super Tuesday primaries on February 5, 2008, and with Mike Huckabee’s concession in early March the contest was over. Democratic U.S. senators Hillary Clinton (New York) and Barack Obama (Illinois) waged a nomination contest that included primaries and caucuses in all states and territories, holding aside the disputed early contests in Florida and Michigan.

Just as the field expanded in the Democratic nomination contest, so too the electoral map for the general elections grew to include states that had been safely Republican—North Carolina, Indiana, and Virginia, for example—and states that had been trending less Republican, such as Nevada and Colorado. This had the effect of forcing McCain to defend states that had been safe for Bush in 2000 and 2004 while having also to compete in perennial battlegrounds like Ohio, Pennsylvania, and Florida.

One important reason more states were in play was the substantial money advantage Obama had in both the nomination and general election phases of the campaign. He outspent Senator Clinton through May 2008 by $43.8 million (see chapter 3), and in the general election Obama and the Democratic National Committee (DNC) outspent McCain and the Republican National Committee (RNC) by $150 million (see chapter 4). Obama’s spending and aggressive campaigning in states that Bush had taken for granted, combined with McCain’s limited spending as a result of accepting public funding, meant that McCain had to make hard choices in resource allocation.

As happened in the 2006 midterm election, the Democrats and their interest group allies succeeded in expanding the playing field of competitive congressional races in 2008. In the years following redistricting, competitive U.S. House races typically decline in number. In the 1990s, for example, the number of competitive races in early October of each election year declined in a linear manner over time. Since 2000 a different pattern has emerged: there were fewer competitive contests in 2002 than in 1992, but the number of competitive contests rose in 2006 and 2008. In 2006 and 2008 Democrats targeted vulnerable Republican incumbents in both houses but especially in the U.S. Senate. The success of Barack Obama in bringing into play once solidly GOP states like North Carolina, Colorado, and Virginia helped Democratic congressional candidates.

Electronic Electioneering

Technology and the Internet reached new levels of importance in 2008. This was true in fundraising but also in persuasion and electioneering. Over the eight years leading up to the 2008 elections there had been glimpses of the potential of the Internet as an organizing and fundraising tool. In 2000 John McCain’s campaign was recognized by scholars as having “the most successful Internet effort,” raising a reported $6.4 million online. Interest groups like MoveOn.org also successfully used the Internet to raise money and mobilize volunteers. In 2004 the Howard Dean campaign raised about $20 million online. In 2008 Republican candidate Ron Paul developed what one observer called “a rabid online community” and surprised many with his fundraising success. His extensive use of the Internet demonstrated the potential of these tools for both parties.

But the Obama campaign integrated technology, message, and strategy in ways not seen before. As Joe Trippi, who worked on the Dean campaign, put it, “It’s like the Dean campaign [was] the Wright brothers, [and] the Obama campaign was Apollo 11.” Part of this owed to the candidate himself, who was committed to the use of technology, and part to the dynamics of the initially steep uphill battle for Obama. As the campaign began, Obama was considered to be significantly behind Clinton in both fundraising ability and name recognition. Quite likely motivated by this campaign reality, Obama reached out to individuals and groups that are traditionally underused in political campaigns, among them youth and minorities. He maintained a large network of field offices, staffed mostly by volunteers, and put to use the strengths of his volunteers—their high levels of enthusiasm and energy and their capacity to use technology—to build support and electoral success in time-intensive caucus states.

Jon Carson, the national field director of the Obama campaign, praised Obama’s ability to generate new voter contacts through creative use of Internet social networking: “As a community organizer himself, he knew the value of a list and the value of using every opportunity to get that work done.” Complementing the campaign’s frequent text messaging and e-mails to supporters, a major innovation was Obama’s own social networking website, My.BarackObama.com. Obama’s early and continued opposition to the war in Iraq also helped build his popularity with many influential liberal voices on the Internet, such as Arianna Huffington and Markos Moulitsas. The net effect of this was an estimated 7 million supporters who were connected to the Obama campaign in some way through social network and campaign website programs. By the time of the election the Obama campaign had an e-mail list of 10 million, and that number rose to 13 million by the time he took office.

The Rules

The rules for financing the 2008 federal elections were based in large part on the 1974 post-Watergate amendments to the Federal Election Campaign Act of 1971 (FECA) and on the Bipartisan Campaign Reform Act of 2002 (BCRA), which took effect with the 2004 election cycle. These major legislative structures left to the Federal Election Commission (FEC) important roles in rulemaking and enforcement. The courts have been important in upholding some provisions of FECA and BCRA while declaring other parts unconstitutional. In 2008, for example, court rulings since the previous presidential election changed some aspects of the law, particularly with respect to the timing and types of advertisements run by interest groups.

The underlying principles of both acts center on contribution limitations and disclosure. Together, the laws require disclosure of candidate, party committee, group, and large individual contributions to candidates and disclosure of what candidates, party committees, and groups spend on federal elections. Meanwhile, the laws limit what individuals and groups can give to federal candidates, political party committees, political action committees (PACs), and other committees that finance federal election activity and are therefore subject to federal law.

Several different groups were created by these rules. Often these groups are referred to by the section of the law they fall under; thus the rules in some ways define the players. Section 527 organizations are tax-exempt nonprofit organizations that have as their “principal purpose” political activity. Technically they encompass both groups that register with the FEC as political committees and those that do not. The most visible of the 527s have been organizations that are involved in politics but have not registered as political committees with the FEC. Through much of the 2000 election cycle, Section 527 organizations could avoid disclosure by not registering with the FEC and thereby not having income to report to the IRS. That has changed, and some disclosure is now required through the IRS.

Section 501(c) of the Internal Revenue Code defines a range of organizations, some of them charitable and tax exempt, with different restrictions on what, if any, role such groups can play in political campaigns. Organizations established under Section 501(c)3, for example, are charitable organizations. Contributions to these organizations qualify as tax deductions, and the organizations are the most restricted in terms of campaign activities. They “cannot endorse candidates, contribute to campaigns, or organize a political action committee. However, they can conduct nonpartisan voter registration and get-out-the-vote efforts in accord with FEC regulations as well as participate in activities related to state and local ballot measures. In addition, they may sponsor candidate forums on issues of public concern.” By contrast, Section 501(c)4 groups are public advocacy organizations and have significantly more latitude in electioneering, so long as election activity is not their primary purpose.

Disclosure

Although debate continues about many aspects of campaign finance regulation, there is widespread consensus on the need for transparency, or disclosure. The campaign financing laws mandate reporting to the FEC of all contributions from individuals, party committees, and PACs. For individuals, once a person has given more than $200 to a particular candidate or political committee in an election cycle, that donor’s name is disclosed and becomes available to the FEC. Specified types of contributions to Section 527 organizations are reported to the IRS by the committee receiving the contribution. Donors whose combined contributions to a candidate do not exceed $200 are not identified by name in FEC reports. Their contributions, however, are disclosed.

The Bipartisan Campaign Reform Act expanded on the FECA disclosure rules by requiring “disclosure of the costs of electioneering communications by any spender who exceeds $10,000 in aggregate expenditures and the disclosure of any contributions of more than $1,000.” Electioneering communications that must be disclosed are television and radio advertisements that refer to a federal candidate and are broadcast within thirty days of a primary or sixty days of an election. State parties are also required to disclose any money spent on voter registration or voter mobilization efforts if a federal candidate is on the ballot.

Contribution Limitations

A second element of current campaign finance rules is contribution limitations for individuals giving to candidates, party committees, or political action committees and for party committees and PACs giving to candidates or to each other. Table 1-1 provides the contribution limits for individuals over the two-year election cycle, before and after passage of BCRA.

Under FECA, an individual could give $50,000 over each election cycle to parties, candidates, and PACs combined. The aggregate limit under BCRA was almost doubled, to a two-year cycle limit of $95,000. Most of the contribution limits under BCRA are indexed for inflation, so the aggregate amount an individual was allowed to contribute to parties, candidates, and PACs in 2007–08 rose to $108,200. Of this total, an individual could contribute in most cases $4,600 to a candidate ($2,300 in the primary and $2,300 in the general election) and in the event of a runoff another $2,300. The total of an individual’s contributions to all federal candidates in 2007–08 was capped at $42,700. The remaining $65,500 of an individual’s two-year cycle limit could be contributed to party committees or PACs. An individual could give $28,500 to any single national party committee in 2007–08. In addition, an individual could give up to $10,000 to a state or local party committee. This includes a category of contribution, sometimes called Levin funds after Michigan senator Carl Levin’s amendment to BCRA, that represents “funds raised and spent by state, district, and local party committees for federal election activity, subject to a combination of state and special federal restrictions,” including that they “may not refer to a clearly identified candidate for federal office.” An individual could also give up to $40,000 to PACs, with a limit of $5,000 to a single PAC per year. Thus an individual wishing to give the maximum allowable in a federal election must contribute more to interest groups or party committees than to candidates.

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