Analysis: Problems with Presidential Public Financing System and Solutions in New Legislation Introduced In Congress

Analysis: Problems with the Presidential Public Financing System
and Solutions in New Legislation Introduced by Senator Russell Feingold (D-WI)
and Representatives Marty Meehan (D-MA) and Christopher Shays (R-CT)

The presidential public financing system was established in 1974 in the wake of the Watergate scandals to provide candidates with the financial resources necessary to compete effectively for the presidency without becoming obligated and indebted to their campaign contributors.

The system worked well for most of its existence, before breaking down in the last presidential election.

The use of soft money in presidential elections undermined the presidential system’s effectiveness and credibility. The Bipartisan Campaign Reform Act of 2002 (BCRA) addressed this core problem by banning soft money, but other major reforms are necessary to restore the viability of the presidential financing system.

These reforms are contained in new legislation, introduced on July 26, 2006 by Senator Russ Feingold (D-WI) and Representatives Marty Meehan (D-MA) and Christopher Shays (R-CT).

The problems with the presidential public financing system and the solutions contained in the new legislation are detailed below:

1. Raise the spending limits for the presidential primary and general elections and increase the amount of public matching funds available to presidential candidates for the primaries.

Problem: The current spending limits for the presidential elections are too low to ensure that candidates who enter the presidential financing system can run competitive races. The presidential campaign finance system also does not provide sufficient public funds for presidential candidates to conduct their campaigns, particularly in the presidential primaries.

Candidates who currently accept public financing and agree to the existing campaign spending limits face the potential of being financially overwhelmed by an opponent who rejects public financing and chooses to raise and spend private contributions without being subject to any spending limits.

Solution: The legislation increases the amount of public ”matching” funds in the primaries, in order to provide more public funds to primary candidates and increase their ability to compete with privately-financed candidates.

The current 1:1 match of public funds for up to $250 of an individual contribution is increased to a match of 4:1 for up to $200 of an individual contribution. Under the legislation, an individual who contributes $200 to a presidential candidate ends up, in effect, providing $1,000 to the candidate. The increase in the value of smaller contributions that are made also increases the incentives for such contributions to be given. In addition, candidates still in the race after March 31 of the presidential election year receive an additional 1:1 match of the first $200 of any individual contribution made after that date.

Under the legislation, the overall spending limits for the presidential primary and general elections are substantially increased. In addition, the state-by-state spending limits for the presidential primaries, which have been ineffective and of limited value, are repealed.

Increasing the overall spending limits for the primary and general elections will improve the ability of publicly-financed candidates to run effective campaigns and help restore their ability to compete with non-participating well-financed candidates who are using only private funds and are not subject to spending limits.

Under the legislation, the overall spending limit for the presidential primary period is increased to $150 million, about three times the current limit in the presidential financing system. Of this total limit, no more than $100 million can be spent prior to April 1.

The legislation also increases the spending limit in the presidential general election from the current limit of about $75 million to $100 million.

The legislation also provides that in order to be eligible for public funds, presidential candidates must agree at the outset to accept public funds and spending limits for both the primary and general election presidential races. Presidential candidates will no longer have the option to raise and spend large sums of private money in the primaries and then receive a large public grant for the general election.

2. Make public funds available to primary candidates earlier in the process.

Problem: Presidential primary candidates who enter the public financing system currently can begin raising private contributions that are eligible to be matched with public funds beginning on January 1 of the year before the presidential election year. They are not eligible, however, to receive any of these matching public funds until January 1 of the presidential election year.

With the front-loading of the presidential primaries, a nominating process that ran from January to early June in 1976, when the public financing system first took effect, is now producing party nominees by March of the presidential election year. As a result, the presidential financing system is out of sync with the presidential nominating process. The actual campaign for a presidential party nomination begins far in advance of the presidential election year and publicly financed candidates often must arrange interim funding to cover their costs until they can receive public matching funds, beginning on January 1 of the election year.

Solution: Under the legislation, candidates who enter the public financing system are eligible to receive public matching funds beginning on July 1 of the year prior to a presidential election year, instead of beginning on January 1 of the election year.

3. Provide additional public funds and increased spending limits for a publicly-financed candidate where a privately-financed candidate has significantly outspent the spending limits applicable to the publicly-financed candidate.

Problem: In order for candidates to voluntarily enter the presidential financing system, they must believe that they will be able to run competitive races against candidates who choose not to enter the system and instead can make unlimited expenditures of private contributions or personal wealth. This requires making upward adjustments to the spending limits for presidential candidates accepting public funds when privately-funded candidates are spending significant amounts over these spending limits. It also requires increasing the amounts of public funds provided to the candidates participating in the presidential public financing system.

Solution: Under the legislation, if one or more participating candidates in a presidential primary election are running against a non-participating candidate of the same party who raises or spends more than 120 percent of the primary election spending limit (that is, the non-participating candidate spends either more than $120 million during the pre-April 1 period, or more than $180 million during the whole primary period), the spending limit for the participating candidates is increased to either $150 million during the pre-April 1 period, or $200 million during the whole primary period.

If the non-participating candidate goes on to spend more than 120 percent of the increased spending limit (that is the non-participating candidate spends either more than $180 million during the pre-April 1 period, or more than $240 million during the whole primary period), the spending limit for the participating candidates is increased to either $200 million during the pre-April 1 period, or $250 million during the whole primary period. In addition, if any of the spending limits are increased, the participating candidate receives an additional 1:1 match in public funds for the first $200 of all contributions received.

If a participating candidate in the general election is running against a non-participating candidate in the general election who has raised or spent more than 120 percent of the combined primary and general election spending limits, (that is, the non-participating candidate raises or spends more than $300 million combined during the primary and general election period,) the amount of the public funds provided to the participating candidate in the general election is doubled to a total of $200 million.

4. Increase the funds available for the presidential public financing system.

Problem: The current $3 tax check-off will not provide sufficient funds to finance the revised presidential public financing system. Most taxpayers, furthermore, are not aware of the reasons for the check-off program and many do not understand they will not incur any additional tax liability if they choose to check off $3.

Solution: The amount of the check-off on the tax form to fund the public financing system is increased from $3 to $10 for an individual and from $6 to $20 for a married couple. The check-off amounts also are indexed for inflation. The legislation also directs the IRS to require that tax preparation software cannot automatically accept or decline a check-off of taxpayer funds to the Presidential Election Campaign Fund. The legislation also provides for the Federal Election Commission to spend up to $10 million from the Fund during a four year presidential election cycle to conduct a public education program to inform the public about the Fund and its purposes.

5. Prohibit the national parties and their agents and officers, and federal officeholders, from raising or spending soft money to pay for the party nominating conventions.

Problem: Notwithstanding the passage of BCRA, federal officeholders and the national parties have continued to raise soft money for convention ”host committees” to pay for the conventions, on the premise that such funds are not ”in connection with” a federal election, but rather are for municipal or civic purposes, and thus unregulated by BCRA. The campaign finance laws, however, define a convention to nominate a candidate as a federal election. And the fact is that soft money raised by federal candidates and spent by national parties to pay for national conventions creates precisely the same dangers of corruption and the appearance of corruption that are addressed by BCRA.

Solution: The bill prohibits national political parties from raising or spending soft money to pay for the costs of their nominating conventions, and prohibits federal candidates and officeholders from soliciting soft money to pay for conventions costs. The parties will continue to be eligible to receive public funds to pay for nominating conventions but will no longer have to agree to spend only these public funds on their conventions. In addition to receiving public funds, the parties will be able to raise and spend private contributions subject to federal contribution limits and prohibitions to pay for the costs of their conventions.

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Capital Bits and Pieces Vol. VI , No. 73 Released: Thursday, July 27, 2006