Hippocampus American Government: Campaign Finance Reform

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Congress enacted campaign finance reform due to criticism directed toward interest groups and Political Action Committees (PACs). Federal Election Campaign Acts were passed in 1971, 1974, and 1976. Early legislation limited individual donations to candidates to $1,000 and $5,000 to PACs. PACs in turn may only donate $5,000 to individual candidates. Soft money, or donations given to parties for general use, could be raised without limit prior to the 2002 reform. The McCain-Feingold Act (2002) was passed to close loopholes on soft money. It prohibited raising soft money at the federal level, set limits on the use of soft money by state political parties, and increased the maximum individual contribution to $2,000. The 1976 Supreme Court case of Buckley v. Valeo set an important precedent regarding PACs. The Court determined that according to First Amendment rights, PACs have the right to spend money indirectly to support a candidate. For example, PACs can create advertisements or printed material for a candidate without it counting toward their campaign donation limit.

In 1974, Congress set up the Federal Election Commission (FEC), an independent agency of the executive branch. It is comprised of six members appointed by the president with Senate confirmation. The FEC requires the timely disclosure of campaign finance data, places limits on campaign contributions and campaign expenditures, and provides public funding for several parts of the presidential election process. The FEC mandates that any contribution of more than $5,000 must be reported within 48 hours of its receipt. Similarly, it mandates that any donation of $1,000 or more received in the last 20 days of a campaign must also be reported within 48 hours of its receipt.

The FEC also gives public funds to presidential campaigns, if the candidate qualifies for funding. Every major party nominee qualifies for a public subsidiary to cover the costs of a general election campaign. However, the candidate may not spend more than the subsidy and may not accept campaign funds from any other source. Should a candidate refuse the public money, he or she would be free to raise as much money as they wish from private sources. Despite these stipulations, nominees from both parties usually accept the public money from the FEC.

A minor party candidate can also qualify for public funding, although not automatically. To be eligible, the party must be listed on the ballot and poll at least five percent of the votes in the last election. If the third party generates the five percent of votes necessary in the current election, the party may apply for the money after the fact. Ross Perot was a successful third party candidate in 1992 when he won just over 19 percent of the vote and qualified to receive $29.2 million to finance his Reform Party candidacy in 1996.