Facts

You probably couldn't tell from the 2004 election, but in 2002 Congress set strict limits on how much money can go into federal campaigns. The McCain-Feingold Act, as it's commonly known, was passed with the intent of closing loopholes in earlier campaign finance laws. Opponents of the reform are troubled by how it limits the 1st Amendment right to free association and free speech. Cynics suspect that no matter how much you regulate campaign spending, people with political opinions and money to burn will find a way to toss their 2-plus cents into the election fray; 527's are the latest example.

The laws

In 1867 Congress passed the first law putting a check on how political campaigns could raise money (by saying government employees couldn't wedge money out of naval yardworkers). Campaign finance laws have been expanding – and getting more complicated - every since.

Of the dozen plus laws governing campaign finance that were passed in the last century, the two that define today's system are the creation of the Federal Election Commission (FEC) in 1974 and the McCain-Feingold Act of 2002. (OpenSecrets)

Federal Election Campaign Act (1971) and its amendments (1974)

The Federal Election Campaign Act (FECA) and its harder hitting 1974 amendments took the hodge-podge of earlier finance laws and wrapped them into a neat comprehensive package, limiting how much federal campaigns could spend and how much individuals could give to political committees, parties and candidates. Perhaps most importantly, the '74 amendments set up the Federal Election Commission (FEC) to oversee that campaigns were following the rules.

McCain-Feingold Act - aka BRCA (FEC)

The McCain-Feingold Act of 2002, officially the Bipartisan Campaign Reform Act (BCRA), set the campaign finance rules we have today. Its main shift was to abolish “soft money” – unlimited money that could be used toward “party building” activities. BCRA also set limits on “issue ads,” which were seen as a loophole to the finance laws. The chart below compares the regulations of the FECA era compared to the BCRA.

The BRCA rules

Who can give

• Individuals. See the chart below on how much.

• Political Committees. Political committees and all their variants - political action committees, or PACs, and leadership PACs - are independent groups that come together to help elect candidates. They raise money that they can then hand over to party committees and candidates. Like individuals, they're limited in how much they can give (from $5000 - $26,700). PAC contributions are a drop in the bucket for the presidential races, but pay for roughly a third of congressional races (OS).

• Party Committees. These are political committees that officially represent a local or national party. They have limits in how much they can give candidates, but they can transfer funds between other party committees to their hearts' desire.

Who can't give. Corporations and unions cannot give money to candidates or committees, although they can spend money on other organizing efforts (see loopholes below). Foreigners who are not citizens or legal residents and government contractors also cannot give to federal campaigns.

Who can receive - and what they can spend their money on:

• Political committees can receive limited donations from individuals and other committees and, as mentioned above, can give limited amounts to candidates. They can spend unlimited funds, however, on "independent expenditures."

• Party committees can receive limited money from individuals and other committees and unlimited money from other party committees. They can give a limited amount to candidates and can spend limited funds on "coordinated" expenditures, but can spend an unlimited amount on "independent expenditures."

• Candidates can receive limited amounts from individuals and committees, but once they get their money, they can spend it where they please.

Note: numbers are adjusted each year for inflation. Also see the FEC's chart for more details on how much committees, PACs, etc. can give.

Softish money that's still around (aka loopholes)

In spite of the strict rules limiting money to committees and candidates, campaign finance rules allow some softish money in to the committee world (for example, Levin funds), while it leaves other spenders of election related money completely off the hook (for example, individuals).

• Independent expenditures. Individuals, groups of individuals and committees can spend an unlimited amount of money promoting a candidate - as long as they don't coordinate with the candidate or her party. If you're a group and you raise more than $1000, however, you'd have to register as a committee, and so be limited in how much money you could raise from individuals. But if you're a gazillionaire and you operate on your own, you can spend as many of your gazillions as you'd like on ads supporting or attacking a candidate. (FEC)

• Levin funds. Individuals (and corporations and unions, if state law says it's okay) can give up to $10,000 on top of the limits listed above to local and state parties for grassroot get-out-the-vote type activities. (FEC)

• Corporations and unions are free to spend unlimited money on:

  • Voter registration and get-out-the-vote activities directed at their stockholders, employees and members.

  • Setting up and running a political action committee (for the committee's overhead costs).

• Millionaire's amendment. Candidates who run against megawealthy candidates can have the limits on their donations raised - to make a fair fight. (FEC)

• Conventions. Convention hosting committees and the money they raise to run the Democratic and Republican conventions are not regulated by campaign finance rules.

• Issue ads. Before BRCA, corporations and unions had no restrictions on their ability to pay for "issue ads" - ads that supposedly only express an opinion on an issue but everyone knows are supporting or opposing one candidate. Now these ads can't be shown 30 days before a primary or 60 days before a general election - but outside those time limits, they're still free to air. Now, however, the Supreme Court have given "grass-roots" groups a loophole to air ads that target candidates before elections, provided the ad is not about the election (WP), saying BRCA went too far when it limited groups' ability to mention candidates' names in issue ads (the FEC will try to make sense of that ruling in regulations by December '07 - WP). The House has also voted (as part of the its Commerce-Justice-Science spending bill) not to fund enforcement of issue ad restrictions.

• Ballot measure issue ads. The FEC voted in August 2005 to allow unlimited soft money to go toward issue ads supporting or opposing state ballot initiatives.

• Movies and movie ads. 2004 gave birth to the election flic - with films like Fahrenheit 911 drawing a thin line between art and electioneering. But, along with books and news media, films are not currently regulated - and because of their special protections under the first amendment, it's doubtful that will change soon - but the FEC was considering changes in late 2005.

• 501(c)s. Some of these nonprofits are allowed to spend money on get-out-the-vote activities and issue advocacy. Although campaign finance law loosely regulates 501(c)s, these organizations have to comply with IRS rules which also limit how they can spend their money. The FEC was considering regs for 501(c)3s in late 2005.

• The press and, as of March 2006 (WP), internet sites are exempt from campaign finance rules (excepting, of course, for paid political advertising).

• And then there are 527s...

See the Federal Elections Commission for a pretty thorough backgrounder on McCain-Feingold.

527's

527's, named after the IRS code they fall under, are tax-exempt organizations that engage in political activities. They became big players during the 2004 Presidential election because they are NOT covered by the BCRA, and so could take in unlimited money contributions.

The loophole

• Though 527's cannot endorse a candidate, receive party funding, or collaborate with a candidate's campaign, there are no restrictions on opposing a candidate as long as they're acting as free agents

• Since they are not bound by the BCRA, they can advertise throughout the 60 days prior to the election, including election day

Spending PI

Of the 471 registered 527's

• 2004 – $554 million

  • Democratic or liberal organizations - $365 million OS

  • Republican or conservative organizations - $140 million OS

• 2000 – $149 million

For a list of the largest 527's, see PublicIntegrity.org. To see the 527 code itself, see Cornell's Legal Information Institute.

Past and Current Spending - the big picture

We tried to bring together all the fundraising numbers from the past few presidential cyles to give the full picture of all the money that goes into federal elections. We got pretty close. For what's missing - beside the empty boxes - see "loopholes" above. All the numbers are drawn from PoliticalMoneyLine, the U.S. Census, OpenSecrets, Public Integrity, and the Campaign Finance Institute.

*2000 data includes soft money contributions **These numbers include $260 million the PACs gave candidates in 2000 (Census) and the $218 they gave candidates in 1996 (Census).

Public funding

Since 1976, presidential nominees have had the option of requesting federal funding for their campaigns. The catch is, if they accept federal cash, they have to also agree to limit their campaign spending to the amount of funds they get and not accept more contributions. In 2004, both Bush and Kerry passed on federal funds - which amounted to $75 million apiece. For more on federal funding, see the FEC's surprisingly clear guide. The Washington Post doesn't see candidates going for public funding in '08 either (WP).

Where the facts are from:

• FEC - Federal Election Commission - government site

• OpenSecrets - site of The Center for Responsive Politics, a non-profit research group that tracks money in politics

• WP - Washington Post - mainstream newsapaper

Updated July 07

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